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We comment on earnings from Capital One (COF), First Horizon (FHN) and Nokia (NOK). Next week, the deluge starts, with ten companies reporting.

We’re still thinking there’s a decent chance that the market’s action since May and June is part of a big bottoming process, but it’s also pretty clear that, even if that’s true, the market has more work to do—the selling of the past three weeks has erased many of the positive top-down signals from the prior month or two, with the intermediate-term trend of the major indexes pointed down, the broad market unhealthy and growth stocks in general again underperforming. We’re still aiming to hold onto resilient names, but having plenty of cash is also a must, as is staying flexible.


This week’s list has a bunch of good charts, reflecting the fact that many nooks and crannies of the market are still looking somewhat solid. Our Top Pick is a leader in a commodity niche that has a good launching pad and has come under strong accumulation.

October is the most celebrated month in Cabot’s native home of Salem, Massachusetts (i.e., home of the Salem Witch Trials). All month long, it’s one costume-heavy Halloween party. Will a similar party commence on Wall Street? The odds favor it. October has a long history of being a month where markets bottom – and rallies begin. In fact, it happened just last year. One area of the market that has already begun to rally is cannabis, thanks to some (long overdue) new legislation. So today, we add back a bit of cannabis exposure courtesy of Cabot Cannabis Investor Chief Analyst Michael Brush.

Details inside.

We’re restoring Buy ratings on a couple of stocks, and averaging up in one of them as it has begun to emerge from a multi-month rest period. That said, we’re still holding about 14% in cash given the iffy broad market and the many divergences in the market.

Weave (WEAV) reported Q4 results after the close yesterday that beat expectations on both the top and bottom lines while also giving 2024 guidance above consensus. Revenue grew 21.2% to $45.7 million (beating by $1.5 million) while EPS of -$0.01 improved by $0.05 over last year and beat consensus by $0.03.

The major indexes quickly retreated after the prior couple of good weeks, with growth-oriented areas falling the most, a lot of stocks being rejected near resistance and some old winners being taken out and shot. Despite that, there are some green shoots out there—by the letter of the law, some broad indexes (like small- and mid-caps) are in intermediate-term uptrends, and we’re also seeing some sectors assert themselves, especially in the commodity space. We’re not bullish, and will leave our Market Monitor at a level 4, though our overall advice remains basically unchanged: Hold plenty of cash, honor your stops and, if you do some buying, keep it small.


This week’s list is again heavy on commodity-type names, though we’re also seeing a few recent earnings winners that have some growth to them. Our Top Pick straddles the line between growth and commodity and is one of the few names to move out to recently all-time highs.

There were a few positives last week, including some intriguing early-week strength, with some very powerful breadth, and, even with the slide of the past couple of sessions, far fewer stocks were hitting new lows compared to a couple of weeks ago. Given how everyone is leaning bearish, there’s plenty of upside potential if the market can catch a spark, but the jobs report-induced selling reinforces the pattern of selling on each and every rally. Long story short: While our eyes are open, nothing has changed with the major evidence. We’ll stick with a level 3 on our Market Monitor.


This week’s list is heavier on energy and medical areas, though our Top Pick is a name that should benefit from higher rates. As usual, though, we think aiming for dips is the right move.

Stocks are the highest they’ve been since last summer, and with the debt ceiling in the rear-view mirror and the Fed sounding less hawkish these days, it’s possible they could keep rising as we enter Summer 2023. One sector that’s been unstoppable of late is artificial intelligence, so today we add some more AI exposure, which has already served us well with the performance of Microsoft (MSFT). The new addition is a lesser-known name but is equally red-hot. Mike Cintolo recently recommended it to his Cabot Top Ten Trader audience.

After a non-stop run for two-plus months, we’re finally seeing a bit of sloppiness in the Nasdaq and some growth stocks that have had huge runs— combining the recent action with the fact that the advance has been going on 12 weeks and earnings season is upon us, and further stumbles are certainly possible in growth. All that said, it’s been more about rotation than outright selling, as the broad market has actually picked up steam, and none of this alters our big-picture bullish thoughts, as the top-down evidence remains overwhelmingly positive. Put it together, and we’re still bullish, but we’ll pull in our Market Monitor a notch to a level 7 to reflect some of the near-term wobbles.

This week’s list reflects the market action, with more non-tech names, be it cyclical plays, drug firms or even a bull market-related business. Our Top Pick is a bull market stock that has just come alive after a long bottoming effort.

After a sour first week of the year, leading stocks snapped back very nicely last week, and when you add in the other encouraging intermediate-term vibes (trends of the indexes and most sectors are up), we remain bullish overall. That said, we’re also keeping our feet on the ground: The current advance is now about two and a half months old, earnings season is here and the broad market was a notable laggard last week, all of which means further volatility and crosscurrents are possible, even likely. We’ll leave our Market Monitor at a level 7.

This week’s list is another where’s there’s something for everyone. Our Top Pick is one of many medical-related stocks that’s showing strength thanks to a new product, great Q4 guidance and expectations of accelerating growth this year.

WHAT TO DO NOW: Continue to lean bullish. The market’s overall position remains in a similar position—far more good than bad, though still a few flies in the ointment—so we continue to look to add exposure, but to do so carefully, as many stocks and indexes are battling with resistance. Tonight, we’re going to fill out our position in Flutter Entertainment (FLUT), adding another half-sized stake (5% of the portfolio). We’re also placing Argenx (ARGX) on Hold given its recent action. Our cash position will now stand near 25%.

Current Market Outlook


The ping pong environment we referenced on this page last Monday continued last week, with growth stocks bouncing back from a ragged prior week, while some of the recently-strong cyclical groups took a breather. We expect more under-the-surface volatility going forward, mostly due to earnings season, which is now moving ahead at a breakneck pace; so far, there have been a few potholes, but many stocks have reacted well to their reports. All in all, we remain mostly bullish, but two pieces of advice: First, don’t forget to book some partial profits when you have them, and second, be sure to keep your feet on the ground and look for advantageous entry points. We’ll keep our Market Monitor where it is as we see how leaders react to earnings.

This week’s list is heavier on emerging market and retail stocks than usual, which could be a clue to future leadership. Our Top Pick is ServiceNow (NOW), a blue chip-ish cloud software firm that decisively broke out of a tight launching pad on earnings next week. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
GDS Holdings Limited (GDS)	80.15	37-39	34-35
Huazhu Group (HTHT)	30.89	41.5-43.5	37.5-39
Ollie’s Bargain Outlet (OLLI)	103.94	93.5-97	85.5-87.5
Pilgrims Pride (PPC)	25.52	25-26.5	22-23
Sea Limited (SE)	132.86	24.5-26	21.5-22.5
ServiceNow (NOW)	341.86	263-273	237-244
Sinclair Broadcasting (SBGI)	54.14	42-44	39-40.5
Ulta Beauty (ULTA)	331.95	345-355	320-325
VeriSign (VRSN)	190.71	191-196	178-181
Workday (WDAY)	194.88	200-206	185-188

Current Market Outlook


The past week saw yet another round of rotation, but this one was the sharpest and most violent we’ve seen all year, with many leading growth stocks getting crunched while other areas of the market (especially those benefiting from likely lower corporate taxes) surged. Our advice, as usual, is to follow the plan—some growth stocks look very toppy after long, uninterrupted runs, and for those, selling (or partial selling) makes sense. But other growth stocks are pulling back normally, and some new leadership is emerging. It makes sense to pull in your horns a bit, possibly holding some cash until the market settles down; we’ve nudged our Market Monitor down to reflect that. Right now, we advise taking things on a stock-by-stock basis, holding your resilient/advancing issues, while honoring your stops and selling names that break down.

This week’s list is heavier on cyclical, building and retail stocks, all of which have caught huge updrafts during the past few days. Our Top Pick is Warrior Met Coal (HCC), a big turnaround play in the coal sector. Buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Beacon Roofing (BECN)	0.00	60-63	55-56.6
CH Robinson (CHRW)	0.00	84-87	78-79.5
E*Trade Financial (ETFC)	0.00	48-50	44.5-46
Gardner Denver (GDI)	0.00	30-32	27.5-28.5
GrubHub (GRUB)	140.03	64-67	57.5-59.5
Michael Kors Holdings Limited (KORS)	73.22	55.5-57.5	51-52.5
Peabody Energy Corporation (BTU)	43.32	32.5-33.5	29.5-30.5
Tyson Foods (TSN)	0.00	80-83	74-76
USG Corp. (USG)	0.00	36.5-38	34-35
Warrior Met Coal (HCC)	0.00	21-22.5	17.5-18.5

Current Market Outlook


The market bounced back nicely last week, though the major indexes are still in no-man’s land, sitting in the middle of their two-month ranges, and with many stocks still hovering just south of new highs as earnings season gets underway. We have seen a couple of rays of light (growth stocks are showing a hint of outperformance this month, which is a good thing), but overall, the environment remains on the edge—decisive upmoves by the indexes and breakouts from leading stocks would be bullish, while a move below support and a bunch of downside earnings gaps would be bearish. For now, we’re keeping our Market Monitor neutral, but we’ll let you know if we see a sustained trend getting underway.

This week’s list contains a couple of recent earnings winners, as well as a couple of others that shot to new highs on big volume last week. Because of the market environment, our Top Pick will be a slower, but surer, play—Starbucks (SBUX) isn’t going to double, but it’s just the type of mega-cap name that institutions can pile into following a great quarterly report.

Stock Name	Price	Buy Range	Loss Limit
Zebra Technologies (ZBRA)	154.94	81-84	75-76
WisdomTree (WETF)	0.00	17-18	15.5-16.5
Ulta Beauty (ULTA)	331.95	132-137	122-124
United Continental Holdings (UAL)	96.76	68-71.5	61-62
Starbucks (SBUX)	64.49	85-88	77-78
Royal Gold, Inc. (RGLD)	129.66	72-74	65-67
Janus Capital (JNS)	0.00	17-18	14.5-15
Dexcom (DXCM)	421.36	58-61	54-55
Dollar Tree (DLTR)	0.00	68.5-70.5	64-65
Agrium (AGU)	0.00	101-105	94-95

Not much has changed with the market’s big picture—some energy stocks are still doing well and the broad market is holding up near its highs, but many growth stocks and sectors are still in base-building phases. The goal as investors isn’t to discern what comes next (a leg up or leg down), but to be ready to act in either scenario. That means having your watch list ready (there are a good number of growth stocks beginning to set up), but also remaining defensive until you see evidence that the trend has turned up.

This week’s list is chock-full of energy stocks, which remains the clear leading group in the market. Our favorite of the week is Weatherford (WFT), a turnaround in the oil services space that recently staged a monstrous breakout on bullish earnings.

Stock Name	Price	Buy Range	Loss Limit
Weatherford International plc (WFT)	0.00	19.5-21	17-18.5
US Silica Holdings, Inc. (SLCA)	0.00	43.5-45.5	39-40
RPC Inc. (RES)	0.00	21-22.5	19.5-20
Patterson-UTI Energy (PTEN)	0.00	32-33	30-30.5
Micron Technology, Inc. (MU)	43.31	25-26	23.5-24
Level 3 Communications (LVLT)	0.00	42-43	38-39
Itaú Unibanco Holding S.A. (ITUB)	0.00	15-16.5	14.5-15
Garmin (GRMN)	97.45	55-57	52-53
Greenbrier (GBX)	57.73	48-50	45-46
Consol Energy Inc. (CNX)	0.00	42.5-44	40.5-41

The market remains in full bull mode, despite the “shocking” (to some) news that the U.S. economy contracted by 2.9% in the first quarter. We’re not easily shocked, and we know that the message of the market is what matters, so we continue to recommend that you invest heavily in leading stocks, particularly those that present attractive entry points. Happily, there are plenty to choose from these days, and this week’s issue offers a fine variety, from energy to medical to retail to restaurants to automobiles.

Our favorite stock in today’s crop is Agnico Eagle Mines (AEM), a gold miner that has solid growth prospects and a great technical set-up. While the big jump in gold stocks two weeks ago got a lot of attention, Agnico’s capable management has made a lot of moves that augur well for the long term.

Stock Name	Price	Buy Range	Loss Limit
Tesla, Inc. (TSLA)	818.87	232-245	215-216
Sanchez Energy (SN)	0.00	35-37.5	32-32.5
Schlumberger (SLB)	0.00	109-113	102-103
SolarCity (SCTY)	0.00	68-70	59-60
KapStone Paper (KS)	0.00	32-33	29-30
JD.com (JD)	39.58	27-28	24-25
InterMune (ITMN)	0.00	42-45	37-38
Buffalo Wild Wings (BWLD)	0.00	160-165	147-148
Allegheny Technologies (ATI)	27.78	42.5-44.5	39-40
Agnico Eagle Mines (AEM)	79.05	35-37	33-34

From a top-down perspective, there are some rays of light out there--some of this week’s up volume has been very rare, and it comes on the heels of an onslaught of pessimism. That said, none of our indicators have flashed green, and the biggest thing we’re still seeing is selling on strength--this week, Enphase cracked and forced us to sell. We are adding two half-sized positions tonight in stocks from our watch list, but we’re remaining defensive with 78% in cash.


Elsewhere in this issue, we write about our Aggression Index and how it usually leads market bottoms--and how it’s showing interesting action in recent months. We also highlight many stocks that we’d love to own if the market gets going--we have our shopping list ready, but as always, have to see it first before any major buying.

United stock is getting pummeled for how it treated a passenger on an overbooked flight. In a few weeks, UAL could be the perfect buy-low opportunity.