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It has been a busy week in emerging and global markets.

The MSCI Emerging Markets ETF (EEM) remains in a negative position, just below 20-day and 50-day moving averages. Our portfolio has a 35% cash position and maintains 10% allocation to an ETF that moves opposite the EEM.

Within the Growth & Income portfolio, you’ll find a discussion of retail woes. The Buy Low Opportunities Portfolio features a comparison between two of the rare retailers that emerged from first-quarter earnings season unscathed. I was simply focused on retail stores throughout May. Lots of investors own these stocks, and I figured some of you might find the assessment interesting.

Short-term, the market remains under pressure, and this corrective phase could easily go longer (I don’t sense enough pain yet), but long-term, the market’s main trend remains up, so I continue to recommend that you be heavily invested in a diversified portfolio of stocks that are performing well.

Today’s recommendation is a recent IPO, but it’s not Uber or Pinterest or any of the big popular names. I think you’ll like it, but be careful; volatility is to be expected.

As for the portfolio’s current holdings, several are hitting new highs—and none are performing so badly that they deserve to be sold. So this week we’ll stand pat. Details in the issue.

The month of May brought a much-needed market correction; will June bring the return of the uptrend? Technically, it’s certainly possible, and fundamentally, too, given that global events probably won’t unfold as negatively as investors now fear.

Short-term, the market remains under pressure, notwithstanding today’s strength, so certain defensive measures remain appropriate. But long-term, the market’s main trend remains up, so I don’t recommend any wholesale changes, just minor fine-tuning.

Today, that involves upgrading one strong stock to buy, while selling two stocks that have weakened in face of growing fears of tariffs on China.

As for today’s new recommendation, it’s a high-risk stock with great long-term potential—if we can just get on board at the right time! Details in the issue.

Current Market Outlook


The market’s meltdown today cracked the intermediate-term uptrend that got going back in January, with all major indexes (and many leading stocks) closing well below their 50-day lines today. Big picture, we still see this as a bull market, so we’re still OK holding most of your shares in your strong, profitable stocks; encouragingly, despite taking on water, many stocks are still hanging in there. That said, you also shouldn’t be complacent—after four months with no meaningful pullbacks, it’s likely (not for sure, but likely) the market needs more than six trading days to consolidate the January-April advance. In a nutshell, you should keep tight stops in place on losers and laggards, give your profitable names a bit more rope and, on the buy side, be very selective and/or keep positions small. We’re moving our Market Monitor down to a level 5.

Interestingly, this week’s list is very heavy on growth-y names despite the market’s plunge. Our Top Pick is Match.com (MTCH), which has a great long-term story, and the stock has re-emerged after earnings.

Stock Name	Price	Buy Range	Loss Limit
Avalara (AVLR)	102.00	64.5-67.5	56-58
HubSpot (HUBS)	582.89	170-175	157-160
Lithia Motors Inc. (LAD)	146.30	107-111	97-100
Match (MTCH)	0.00	66-69	58-60
PayPal (PYPL)	147.00	105-107.5	98-100
Roku, Inc. (ROKU)	150.46	74.5-77.5	64.5-66
Tandem Diabetes (TNDM)	74.77	60-63	54-55.5
Teradyne (TER)	82.83	44.5-46.5	42-43
TopBuild (BLD)	111.00	77.5-81	70-72
Woodward (WWD)	111.91	105-108	95-97

We all want to find those rare gems that are disrupting big markets with new solutions.
Today’s company may be one such opportunity. It’s relatively unknown and has a software platform that can address $45 billion in annual enterprise spending right now. That’s a big pond.
It’s a story about big data, digital transformation and business intelligence (BI). These are more than buzzwords. They’re what every company in the digital age needs. And this little guy can give it to them.

The stock market isn’t done rising. Nevertheless, it’s certainly okay to begin accumulating cash with which to buy low during the next stock market correction. The way I personally handle that is when I sell a stock, I put half of the proceeds into my brokerage account’s money market fund, and I buy shares of stock with the other half. In that manner, I get to participate in the market’s bull run while also “saving for a rainy day”. The best antidote to a stock market correction is having money available to buy low!

The main trend remains up, in both the broad market and the cannabis sector in particular. When these uptrends will end, no one knows, but I guarantee that they will someday.

Long-term, however, I remain very bullish on both the companies and the stocks in the industry and continue to adjust the portfolio’s holdings to optimize growth (with reasonable security.)

The market correction continues, and we’re now seeing the selling pressures broaden, with many resilient growth stocks beginning to come under pressure. The longer-term evidence remains positive, so this is still an overall bull market, but our intermediate-term Cabot Tides are clearly negative, so we advise being cautious—cutting back on new buying, holding a chunk of cash and keeping losers and laggards on tight leashes.

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

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 market remains in good health, and all Cabot’s market timing indicators are positive, telling us the odds are that the market will be higher in the months ahead.
For today’s recommendation, I have a well-known dividend-paying mega-cap that has a very good chance of providing good capital gains in the months ahead, thanks to a landmark deal with Apple.
As for the current portfolio, overall, our holdings are performing quite well, with many hitting new highs in recent weeks. The portfolio is now full, but I have no sell recommendations. Details in the issue.