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Last week saw buying climaxes at 41 with selling climaxes at 46. Fairly subdued levels as the range-bound action on the indices continues. Buying climaxes were greatest among Health Care (4), Banks (3), Media (3), Biomedics (2), Buildings (2), Retailing (2),...

Earnings season has seen some huge reactions, and this week brought the drama to our portfolio. There have been sharp selloffs, but we’re not going to overreact. A few rating changes to the portfolio today, but overall we’re in good shape.

It’s not perfect, but the market has been putting one foot in front of the other in recent weeks, with more stocks acting well, more breakouts and the indexes refusing to pull in much. As always, we’re really just taking our cues from the trend of the market (intermediate-term trend up; long-term trend still down but getting close to flipping) and the action of leading stocks (better and better, but still not a bunch of new highs). We’re nudging our Market Monitor up to a level 6, though we’d still favor going slow overall and, ideally, entering on weakness.


This week’s list is another solid batch of stocks with excellent charts, including many that have really stormed ahead on big volume. Our Top Pick looked like it was done for a couple of months ago, but has stormed back to new highs thanks in part to a great post-earnings reaction.

The Emerging Markets Timer is still pointed up, but it’s clearly seen some selling volume over the last week. So while we’re still bullish, we’re not looking to push for further exposure at this point. The only change in the portfolio is the sale of Telkom Indonesia (TLK) that we recommended in a Special Bulletin on Wednesday.

It’s been an interesting week here in Rhode Island, where most people are finally dug out from the roughly three feet of snow that fell across the state Sunday night and into Monday.

Growing up in Vermont, major snowstorms were certainly disruptive. But more often than not, it was all about how we would get to the ski resort without going off the road.

Not much has changed with the market in the two weeks since our last issue. Stocks have largely stagnated, which is no surprise given the calendar and the 20% off-the-bottom rally from April that preceded it. Now comes the hard part: Can stocks continue to climb higher now that they’re hitting new highs and essentially priced for perfection? That could be difficult, especially with tariffs back in the news (in a bad way) and Q2 earnings season underway. So, to prepare for another potential pullback, today we add a value stock that comes from an industry that was left for dead a few short years ago but is now having a moment: movie theaters. It’s a stock I recommended in my Cabot Value Investor advisory last week.

Details inside.

U.S.-China turbulence led to a rollercoaster week for global stocks with some recovery during the past couple of days. Our Emerging Market Timer has turned negative, as EEM has fallen below both its 25-day and 50-day moving averages.

Several of our portfolio companies posted strong earnings this week and the portfolio is already in a conservative stance. We have a new recommendation today that will diversify the portfolio and give us exposure to a country with a youthful population and a robust economy.

The March flooding in Nebraska and neighboring Midwest and Great Plains states is devastating to farmers, crops and livestock. Consumers can expect prolonged food price inflation that reaches around the globe.

Current Market Outlook


Leading stocks stabilized somewhat during the second half of last week, but we’re still seeing plenty of potholes (mostly on earnings reports) and a bunch of rotation out of fast-growing names and into more cyclical, defensive areas. That’s not to say all growth stocks look terrible—we’re still seeing a good number of positive earnings gaps, including a few in today’s issue—but there remain a bunch of crosscurrents on a day-to-day basis, making it difficult to latch onto top performers. As for the overall market, it’s in solid shape, with the intermediate-term trend tilted up. All in all, we don’t advise hiding in the closet, but it’s important to hold some cash and honor your stops, and on the buy side, to pick your entry points and focus on names that have shown recent, powerful buying.

This week’s Top Ten has a diverse mix of stocks, and happily, it includes a good number of stocks with solid growth stories. Our Top Pick is Paycom Software (PAYC), which staged a fantastic earnings gap (and follow-through) last week.

Stock Name	Price	Buy Range	Loss Limit
BJs Wholesale (BJ)	36.69	24.5-26	22-22.5
CarGurus (CARG)	41.58	42-45	38-40
Chart Industries (GTLS)	72.05	73.5-77	66-68
Greenbrier (GBX)	57.73	56.5-58.5	52-53
Illumina Inc. (ILMN)	289.74	320-330	295-302
Ingevity Corp. (NGVT)	99.98	96-100	87-90
Neurocrine Biosciences (NBIX)	123.40	110-114	100-102
Paycom Software (PAYC)	0.00	127-133	114-117
SodaStream (SODA)	142.91	111-116	98-101
Zendesk (ZEN)	82.19	59-62	53.5-55.5

The title of this note might be, “What to expect when you’re expecting … earnings.” As companies in the Cabot Undervalued Stocks Advisor portfolio start reporting earnings this week, let’s look into what is behind the results and estimates.

There’s little doubt the market’s evidence has worsened of late, with our Cabot Tides and Two-Second Indicator re-joining the Cabot Trend Lines on the bearish side of the fence; thankfully, we went slow on the buy side in July and early August, and today, stand with about 65% in cash. But we’re also not completely in the storm cellar, as we still see signs the market could be in a bottoming effort (and in-between phase between bear and bull), so we’re happy to hold onto some resilient stocks and aim to nibble on potential leaders if the market can find its footing.


In tonight’s issue, we dive further into our thoughts on the market, but spend most of the time writing about future leaders, including a few from one sector that’s clearly in pole position to do well if the bulls can step up to the plate