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As we’ve been writing in recent weeks, the evidence was clearly improving in a step-by-step manner, but few stocks were hitting new highs and the market’s longer-term trend remained down. Thus, it’s not a shock that, after a few good weeks, the sellers are beginning to step up. The question is whether the recent rally has run its course, and we’ll just take it as it comes: So far, the dip has been acceptable, but what happens from here will be key, with continued slippage likely having us pare back (possibly quickly).



This week’s list has a broad mix of names, some of which would look good on modest weakness. Our Top Pick is a potential new leader in the chip space after it gapped up huge on earnings last week.

Our recent ratings change from Buy to Sell for an energy company, earnings updates and other comments on our recommended companies, and some thoughts on the amazingly complex macro environment.

The market is in a tough spot, and has been for about a month and a half. It doesn’t mean the bull market is on borrowed time – remember, we had a much deeper correction in July and August, only to have stocks roar to all-time highs by Labor Day – but it does make for a tricky environment in the short term. A news-heavy week (inflation data, the start of earnings season, two big industry conferences) could potentially help turn the tide. But right now, the bears are in control. One subsector that has mostly avoided the recent selling is the airlines. So today, we add one of the stronger airline stocks, courtesy of Cabot Turnaround Letter editor Clif Droke.

Details inside.

The market has been good for a while. The S&P 500 is up roughly 11% YTD and about 30% since late October. But I expect choppier waters ahead.

The main driver of the S&P has been the technology sector, which is being driven higher by the artificial intelligence catalyst. Most of the rest of the market seems to be at the mercy of the interest rate narrative. And that seems to change every couple of weeks nowadays.

The market has regained its footing, and here comes Nvidia (NVDA).


All eyes are on the Nvidia earnings report scheduled to come out after the closing bell on Wednesday. It was an Nvidia earnings report two years ago that featured a massive demand for artificial intelligence products and services that sparked the AI craze and ignited a powerful rally in technology stocks.

It’s been a great market for a while. But it has leveled off since the middle of May. I expect more of the same going forward.

The S&P 500 pulled back in early April after a five-month rally as sticky inflation soured the interest rate narrative. The index then recovered to new highs in the middle of May on an improved interest rate outlook. But stocks have since leveled off as the interest rate outlook got stuck in the mud.

Stocks keep rolling into spring on the heels of an excellent first quarter. Can the next three months match the previous three (or five)? Probably not. But bull markets don’t normally die of old age, and there are plenty of reasons to believe stocks will be higher by the end of Q2. With that in mind, today we add another beneficiary of artificial intelligence, though a company that’s not entirely dependent on AI. Instead, it’s one that’s found new life thanks in part to AI – similar to Microsoft (MSFT) when we added it to the portfolio a year ago. It’s been in Carl Delfeld’s Cabot Explorer portfolio for months, and today we welcome it to Stock of the Week.

While Emerson Electric Co.’s (EMR 36.09 NYSE – yield 3.70%) short-term prospects depend on the vagaries of the global economy, the company has a history of innovation, as well as manufacturing and marketing strength, that bodes well for the longer term. The company’s brands are well-known and well-respected around the...

Many of our stocks appear to be advancing this week. There are a few that I’ll be selling soon due to either valuation or upside price resistance, yet they remain excellent longer-term investments, including Alphabet (GOOGL).

The Emerging Markets Timer is still pointed up, despite the market’s recent consolidation. Our only move tonight is shifting our position in TAL Education (XRS) to a Hold rating.

The technology sector is on fire. Before the market opened on Tuesday, the sector was up 5% for the past week, 15% for the last month, and 34% YTD. It’s also up more than 2% on Tuesday. What happened?


The outlook for many sector stocks greatly improved last Thursday. AI, or artificial intelligence, had been seen as a huge growth engine going forward as companies invest heavily in the technology. Those growth projections got a huge shot of adrenaline and the AI phenomenon got real when semiconductor company Nvidia (NVDA) reported earnings last week.

The iShares EM Fund (EEM) has popped back above its 50-day line, which is a plus, but the Emerging Markets Timer remains basically neutral, having made no net progress over the past two months.

The rotation into the year’s underperformers that started last week has continued, while taking on some aspects of a generic risk-on trade. Financial stocks have outperformed all others since our last update, and tech stocks are up again this week. Materials and industrials also continue to do well.

Cabot Cannabis Investor has delivered several excellent trades in the past month.

* Back on October 31 I was very bullish on the cannabis group which was weak because of the nomination of Rep. Mike Johnson (R-LA) as House speaker. He has always opposed cannabis legislation. I argued there were several other catalysts in the mix regardless of how Congress acted on legal reforms. “Cannabis stocks are a strong buy in the weakness,” I wrote.

I suggested any of the names in our portfolio, or the AdvisorShares Pure U.S. Cannabis (MSOS) exchange-traded fund (ETF) and the leveraged version, AdvisorShares MSOS 2x Daily (MSOX), for simplicity. “I am adding to MSOS and MSOX in the weakness, and I will continue to add, particularly if they get weaker from here.” Since October 31, here’s how those trades have done.