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There were a few pre-election wobbles in the market, but last week’s action looks decisive, with many major indexes that had been capped below their summertime peaks bursting to new highs, while leading stocks went bananas, including many out-of-this-world moves on earnings. Now, to be fair, we’re still seeing some earnings duds, and the action is very hot and heavy, which raises the risk of some sort of near-term rug pull. Thus, it’s important to keep your feet on the ground—but overall, there’s no question the evidence is bullish and the buyers are control. We’re moving our Market Monitor back to a level 8 and could go higher if the buying pressures remain intense.

This week’s list is has something for everyone, with a couple of cyclical names sprinkled in among a batch of strong growth titles. Our Top Pick is showing great growth and just staged a solid breakout from a very tight area last week.

Current Market Outlook


Up is good, so last week’s rebound in growth and continued push higher in the broad market was encouraging. That said, nothing much has changed with the overall evidence—many areas of the market look just fine, with a few indexes actually hitting all-time highs, but growth stocks are still (mostly) in a corrective mode, with a bunch of names having rallied only into resistance. Really, we think the action of the next week or two will tell the tale—resilience and upside from here would suggest the huge pullback earlier this month was more of a shakeout, but renewed selling pressure would hint toward another leg down. Right now, we’re playing things halfway—we’re OK with some buying, especially in stronger names that pull back some, but we’re not pushing the envelope and need to see more from growth before concluding the storm has passed. We’re leaving our Market Monitor at a level 5 today.

This week’s list is very much a mixed bag, with cyclicals, retail, growth and turnarounds all making the cut. Our Top Pick is Thor Industries (THO), which looks like the leader of a fresh move for that group. You could nibble here or (preferably) on dips.

Stock Name	Price	Buy Range	Loss Limit
Big Lots (BIG)	71	66-69	59-61
Devon Energy (DVN)	25	22-23.5	19-20
Dropbox (DBX)	28	26.5-28	24-25
Dycom Industries (DY)	100	95-98	85-87
Groupon Inc. (GRPN)	60	57-60	48-50
Inari Medical (NARI)	114	110.5-115.5	98-101
Macy’s, Inc. (M)	21	18-19.5	15.5-16.5
Owens & Minor (OMI)	37	33.5-35.5	30-31
Summit Materials (SUM)	30	28-30	25-26
Thor Industries (THO)	147	140-147	125-128

The evidence has gotten a bit worse during the past week, with more misses than hits among leading growth stocks, and with the major indexes sagging a few days in a row. That said, early January is often tricky, with lots of crosscurrents, profit taking, repositioning and so on, so we’re hesitant to change our stance for the moment unless we see a decisive show of strength or weakness. The good news is that we are seeing more proper set-ups from many names that rested during the past six to 10 weeks; if a bunch of them emerge, it would give us some newer, fresher leadership to sink our teeth into.

This week’s list includes a bunch of smaller and less-well-known ideas, which we view as a good thing; most of the “obvious” stocks are either chopping around or suffering through some selling. Our Top Pick this week is YY Inc. (YY), which has had a huge run, but isn’t overly pricey and just surged out of a multi-week tight area. It’s very volatile but the potential is big.

Stock Name	Price	Buy Range	Loss Limit
YY Inc. (YY)	0.00	54-58	49-50
WisdomTree (WETF)	0.00	16-17	14.5-15
Western Digital Corporation (WDC)	0.00	80-83	75-76
Workday (WDAY)	194.88	81.5-85.5	77-78
Spirit AeroSystems (SPR)	92.54	32.5-34	30.5-31
NPS Pharmaceuticals (NPSP)	0.00	30.5-32	26-27
Jazz Pharmaceuticals (JAZZ)	0.00	120-127	112-113
Himax Technologies (HIMX)	0.00	12.5-14	11.5-12
E-House Holdings (EJ)	0.00	13.5-14.5	11-12
Canadian Solar (CSIQ)	0.00	33-35	28-29

After a very healthy advance from the mid-November lows, we’re starting to see a little distribution creep into the market; the indexes are chopping around a bit, some stocks have gotten hit on earnings and growth stocks in general have been lagging—not poor performance, but not superb, either. Now, with all that said, we can’t say the action is abnormal; earnings season always brings a few hiccups and the market deserves a breather after a big run. But just consider it a heads-up—the long-awaited market pullback could be starting. We’re keeping our Market Monitor in the bullish camp, as the odds are that any weakness will give way to higher prices.
This week’s list reflects where the strength lie in this market—mostly economically sensitive stocks, along with a smattering of earnings winners. Our favorite of the week is Las Vegas Sands (LVS), which just popped on earnings and is showing great strength after a two-year rest period.

Stock Name	Price	Buy Range	Loss Limit
Robert Half (RHI)	78.58	33.5-34.5	-
The Manitowoc Company (MTW)	0.00	17-18	-
Marathon Petroleum Corporation (MPC)	0.00	72.5-75.5	-
Las Vegas Sands Corp. (LVS)	0.00	52-54	-
HollyFrontier Corporation (HFC)	0.00	50-52.5	-
Community Health Systems (CYH)	0.00	35.5-37	-
CommVault (CVLT)	0.00	75-77.5	-
Credit Suisse (CS)	0.00	27.5-29	-
Celgene (CELG)	0.00	95-98	-
Cameron (CAM)	0.00	62-64.5	-

I like looking at microcars, but I don’t want to buy them. I’m sticking with stocks as there are some great bargains out there.

The broad market has been resilient up until today when we see Microsoft (MSFT) leading the Nasdaq lower.

That said, small caps are hanging tough and are almost exactly flat over the last week.

The darn 10-year yield is still up, which signals the market thinks the Fed did not need to cut by 50bps in September. I’m increasingly dubious about a rate cut next Thursday, even though the market is saying there’s a 95% probability of a cut.

It was yet another strong week for the market and countless stocks, many of which are breaking out to new highs. At some point the market may cool off, but for now at least, I’m not seeing any truly worrying signs. And in fact, the S&P 500 closed at a new record high as the index gained 1.44% on the week, while the Dow added 1.56%, and the Nasdaq rallied 1.63%.

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%.

WHAT TO DO NOW: Remain bullish, but keep some dry powder on the sideline. Most of the evidence remains positive, but the choppy, churning action among some leading stocks (as well as the Nasdaq itself) is still in place. To be fair, many fresher names are acting well, but we’re content to hold some cash and our strong performers and see how things play out. After putting some money to work last week, we’ll stand pat tonight with a cash position of around 27%.

Please note, S&P 500 futures are indicated lower by approximately 4.5% this morning, while the Nasdaq is looking down 5.5%. I go into some of the reasons why below.

Regardless of the reasons, I do not expect to buy or sell many positions today. Instead, as I’ve said for weeks as the trading action had become murkier, I continue to preach patience.

Moving on to our Week in Review …

Please note, S&P 500 futures are indicated lower by approximately 4.5% this morning, while the Nasdaq is looking down 5.5%. I go into some of the reasons why below.

Regardless of the reasons, I do not expect to buy or sell many positions today. Instead, as I’ve said for weeks as the trading action had become murkier, I continue to preach patience.

Moving on to our Week in Review …