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The market had what amounted to a halfway decent eight-day rally, but the sellers pounced on that move, with most major indexes testing or reaching new correction lows today. From here, we’ll be watching to see how this short-term retest phase goes—given the very negative sentiment and obvious reason for the selling (tariffs), a super-powerful rally from here would be intriguing, especially if some resilient stocks (those that are holding well above their lows from a couple weeks ago) take flight. Over time, this decline will set the stage for a buoyant advance with lots of new leadership, but until that payoff arrives, continue to practice patience. As always, though, we just go with the here and now; we’ll yank our Market Monitor back down a notch to a level 3.

This week’s list is again very well rounded, though not surprisingly, there’s fewer go-go growth names, as more well-situated outfits are favored. Our Top Pick has both growth and defensive characteristics, and the stock is holding up very well.

Last week, our opening comments chastised the U.S. Government for such profligate spending that the most likely path as forecast by the Congressional Budget Office is for remarkably high and steady budget deficits into the distant future. We hesitated to write such a gloomy note – and didn’t mention that this is perhaps the greatest risk that long-term investors face (making blips like the next Fed rate decision or Amazon’s next earnings report seem irrelevant).

We worried that we were taking a grim outlier perspective after so many others had dismissed the Fitch credit rating downgrade. However, recent articles in The Wall Street Journal and other high-quality media outlets vindicate our math and view. This is little comfort – I wish that I were totally wrong and that my math or outlook was missing some key facts.

You may have noticed that last week when Nvidia (NDVA) announced its earnings, its stock rose 16% while Explorer recommendation Super Micro Computer (SMCI) went up 32%.

This is consistent with my view that Super Micro is a leveraged bet on artificial intelligence (AI), and I expect this will also be the case when Nvidia’s stock price moves the other way. Nvidia is now priced at an incredible 32 times trailing annual sales and has a larger market cap than Germany’s entire blue-chip DAX index. Super Micro has already tripled in 2024 so consider taking partial profits. Remember, J.P. Morgan allegedly stated that he made his greatest profits by selling too soon.

U.S. stocks have stabilized over the last few days as investors keep confidence in markets despite the Omicron variant, concern over inflation, and mixed economic data. Today we have two upgrades and a new recommendation from a country with an emerging and vibrant fintech culture supported by its government. The standout stock this week in the Explorer recommendations is Marvell Technology Group (MRVL), which jumped from 71 to 91 after the company recently reported that adjusted earnings soared 72% on a 61% increase in sales.

Lower inflation numbers yesterday made interest rate cuts inevitable which moved the market, led by Nvidia (NVDA), which surged 8%. I intended to recommend Nvidia at a price of 100 so I will patiently watch this bellwether stock closely.

To be a good, patient and calculating investor, one needs to do two things at once: Be aware of big macro issues and trends and focus attention on micro issues. That is, closely watch specific companies and stocks, especially smaller, micro stocks offering the biggest upside and risk demanding closer attention.

Today, we recommend a fund that does just that - with a history of remarkable outperformance.

We’re still playing the seesaw game in the markets—up, down, up, down, etc. I don’t see any need for excess worry; just a little caution that we buy the right stocks. I’m still very long-term bullish, and why not?

The economy continues to strengthen; 79% of the companies in the S&P 500 Index reported positive earnings surprises for the second quarter, and the third quarter looks even better; home building continues to be strong, although low inventory levels continue to pressure resales. Home prices appear to be stabilizing, and employment remains strong.

The soothsayers seem to think that the Fed will keep rates steady at its next meeting, and the probability of a recession has fallen to 16%. What’s not to like?

Current Market Outlook


Despite today’s rally, the major indexes have basically been in a sideways trend during the past few months—they’ve tried to get going on the upside twice during the past few weeks, but both times hit a wall and fell back. Now, a sideways trend isn’t a death knell for the market, but it does make it more difficult—it’s vital to pick your spots when buying, to book partial profits on the way up and to honor your stops should a stock break down. We’re going to knock down our Market Monitor a bit—we’re still more bullish than bearish, but given the environment, we want to lighten up on the gas pedal a bit.

This week’s list has a few dependable growers, not surprising given the market’s wobbles. Still, for our Top Pick, we’re going with a faster mover—Ctrip.com (CTRP) recently gapped up on earnings after 18 months out of the spotlight, thanks to a bullish forecast. We think you can start a position around here.

Stock Name	Price	Buy Range	Loss Limit
VeriSign (VRSN)	190.71	63-65	59-60
Twitter (TWTR)	40.37	47.5-50.5	44-45
Signet Jewelers (SIG)	0.00	132.5-136.5	126-127
ServiceMaster (SERV)	0.00	32-34	29.5-30.5
Red Hat (RHT)	0.00	75-77	68-70
Novo Nordisk (NVO)	0.00	52-54.5	47-48
Molina Healthcare (MOH)	0.00	63-65	59-60
Huntington Ingalls (HII)	0.00	135-140	127-129
Ctrip.com International Ltd. (CTRP)	34.94	56-58	51-53
Abiomed (ABMD)	0.00	70-73	64-66

History tells us that all stock market trends change, and if you don’t recognize the leaders of that change early, you risk missing out on the next big winners.

Today’s featured companies are benefiting from the current focus on healthcare, online commerce, dining at home and limited travel behaviors.

All of the stocks that I follow with any regularity finished falling in March, and began to rebound. I’m glad for that, and happy to be buying low. However, there’s still a dark cloud on the horizon. The longer the quarantine situation lasts in the U.S. and in foreign lands, the uglier the economic situation will become. That’s because many companies are scrambling for cash to pay their employees, rent, utilities, etc. while they’re not actually selling any products that can replenish the cash flow.



There are various stocks in today’s issue that I indicated would be good for traders. “Good for traders” bears no resemblance to “good for buy-and-hold investors”, okay? Please read my recommendations carefully. When in doubt, send me an email with your questions.



Lastly, take your time investing cash positions. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges. To that end, I’ve listed short-term upside price resistance targets on quite a few of the stocks. When the stocks rise to those targets, you’re going to tell yourself “my stock is going to keep rising!” Instead, odds are very strong that your stock will turn down. This will be a trader’s market for much of 2020. If you’ve ever toyed with the idea of buying and selling within a stock’s trading range, this is the year to do it! Best of luck to you!

Risk-Controlled Investing is a monthly subscription-based service that includes a monthly newsletter. It is highly innovative and written to teach advisors and individuals how to develop investment portfolios with lower risk. The Risk-Controlled Investing subscription service includes: a monthly electronic newsletter written for financial advisors; monthly “Ask the Editor” Conference...

There continue to be lots of crosscurrents in the market, with many stocks chopping around, lots of big earnings moves (in both directions) and a few leaders from this summer coming under pressure. Overall, though, the bull market is intact, so the lesson from the action is to pick your spots and remain selective when doing new buying. As for your winners, you should give them a chance to breathe, but it’s also important to have mental stops in place—we’re still seeing plenty of rotation out of this summer’s highfliers and into other stocks and sectors.

This week’s list has few stocks that are on most investors’ radar screens, which we view as a good thing. Our favorite of the week is WisdomTree (WETF), a smaller Bull Market stock with a unique story and huge growth numbers.

Stock Name	Price	Buy Range	Loss Limit
United States Steel Corporation (X)	0.00	25-26.5	21-22
WisdomTree (WETF)	0.00	13-14	11.5-12
Trinity Industries (TRN)	0.00	50-52	47-48
Taser (TASR)	0.00	15.5-17	13-14
Las Vegas Sands Corp. (LVS)	0.00	68-70	62-64
Gilead Sciences (GILD)	75.10	68-71	63-64
CARBO Ceramics (CRR)	0.00	114-122	100-102
BE Aerospace (BEAV)	0.00	79-82	74-75
CR Bard Inc. (BCR)	0.00	133-136	126-127
Amazon.com (AMZN)	2.00	345-355	328-332

Current Market Outlook


The strength that began around July 4 continued last week as big investors returned to their desks, pushing most major indexes to marginal new recovery highs. There’s still plenty of news-driven action (volume was light even through last week), and earnings season, which is beginning to get underway in earnest, is sure to have an impact. But the intermediate-term trend (which was iffy in late June) has rejoined the longer-term trend on the upside, and many leading stocks have either snapped back to new highs or are building sound launching pads. We’re always on the lookout for renewed selling pressure, but the evidence has improved, so we’re moving our Market Monitor back to a level 8.

This week’s list is again heavy on growth stocks, though there are a couple of special situations presented as well. Our Top Pick is ZTO Express (ZTO), a young, volatile Chinese stocks with huge growth and a very strong chart. Start small, ideally on dips.

Stock Name	Price	Buy Range	Loss Limit
Energen (EGN)	77.04	72-75	65-67
Etsy (ETSY)	112.97	40.5-43	35.5-37
GDS Holdings Limited (GDS)	80.15	41.5-43.5	37-38
Grand Canyon Education (LOPE)	121.03	114-117	106-108
Madrigal Pharmaceuticals (MDGL)	234.07	270-290	230-240
Palo Alto Networks (PANW)	236.92	212-217	198-201
Roku, Inc. (ROKU)	150.46	45.5-47.5	40.5-42
Sonic Corp. (SONC)	35.22	34-36	31.5-32.5
Workday (WDAY)	194.88	130-134	121-124
ZTO Express (ZTO)	28.84	21-22	18.5-19

Earnings season is upon us again. This quarterly ritual, when all public companies report their most recent results, is when investors can see hard facts about revenues, profits and balance sheets, as well as hear softer commentary from management about their explanations, outlook and plans.

The free report offer has expired, but you can still sign up for our exclusive membership service. Find out more here.

In theory, and often as we prefer, in practice, corporate profits drive stock prices.

J.P. Morgan’s (JPM) booming profits are a testament to this, but what’s behind the profits?

It seems that recently, and perhaps even more in 2025, macro issues will drive the direction of markets and sector trends.

Identifying trends and allocating money to the right sectors and picking the leaders in these sectors is increasingly important. Those that follow the Fed and try to predict the direction of interest rates are one example of this macro-oriented strategy.

Some retail-related stocks are poised to benefit from Black Friday and beyond.

The plain truth is that the War on Drugs (a term first used by President Richard Nixon in 1969) has been a failure. In short, we should legalize it, regulate it and tax it.

For much of the last two years, the white-hot semiconductor space was the industry group least likely to yield any meaningful turnaround candidates. But that dynamic changed following this summer’s tech sector sell-off, which brought many of the previously high-flying chip stocks back to earth (or at least further away from the firmament).

Have you noticed that the chatter concerning the U.S.-China trade deal has gone down considerably? It probably reflects a good reset of expectations.
Our emerging markets timer is positive so it pays to be optimistic and keep investing in outstanding companies with strong fundamentals.

Today’s new recommendation has steadily rising net revenues, strong market position, a robust pipeline of products, an extensive family of patents as well as a strong cash flow and a strong balance sheet.