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This feels like one of those markets that you’re not sure you should trust given how volatile it was in February. But the combination of revenue growth, earnings growth and decent charts, especially among growth stocks, suggests it’s best not to try to predict too far into the future. For now, the evidence in front of us favors the bulls.

Despite the pullback yesterday (specifically in tech stocks) the market appears to be in bull mode. Small caps have been toying with breaking out of their 2017 trading range, but haven’t made a convincing move just yet. Keep an eye on the 870 level on the S&P 600 Small Cap Index.

We’re still cautiously bullish, and focused on the action of individual holdings. Sell any stocks that break down, prune your laggards, and focus new buying on outperformers. We have no rating changes today.

Everybody’s focus is on the high-stakes chess game the U.S. and China are playing with respect to trade, and the upcoming Uber IPO. But behind the scenes there’s a nice little rally going on in a certain group of small-cap stocks!

It’s been a good five months for small cap investors after a rough end to 2015 and an extremely tough start to 2016. But since mid-February, the asset class, along with the broader market, has rallied hard. A healthy pullback in the S&P 600 Small Cap Index in early May set the stage for a burst through resistance, and we’re now sitting just 2.7% below the 52-week high.

We booked a few profits after the big post-election runup in stocks. And with most of our positions holding firm right now, were sitting pat.

Welcome to the fifth and final chapter of my travelog on my recent 17-day 4,218-mile road trip to and through the American midwest and back Today, I wrap up the series with 10 notable things encountered on the trip that were unexpected—presented in the order they were encountered.

Today’s note includes earnings updates, ratings changes and the podcast.

U.S. crude oil hit a seven-year high as stocks, especially tech stocks, face headwinds. Today I am moving dominator Taiwan Semiconductor (TSM) to a Sell as Taiwan, America, China and Japan play a dangerous game. China sent 52 warplanes into the islands air buffer zone after the U.S. and allies held exercises nearby.

Trading remained muted this week, with markets closed Monday for New Year’s Day. Wall Street began to return to work yesterday, and got the New Year off to a good start with solid gains in all the major indexes. On the flip side, some conservative high yield investments, like utilities and preferred shares, declined.

Whether this is a quick V-shaped pullback like we saw after Brexit or a more serious correction will become apparent in coming weeks, but I suggest you become a little more conservative while we wait and see. We’re selling half of CVS Health (CVS) and J.M. Smucker (SJM) today and putting Home Depot (HD) on Hold.

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.

This note includes our review of earnings from Duluth Holdings (DLTH), the Catalyst Report and a summary of the September edition of the Cabot Turnaround Letter, which was published on Wednesday.

With this morning’s first read of Q2 GDP coming in at -0.9% and marking the second consecutive quarter of negative growth (Q1 GDP was -1.6%), many are claiming (or soon will claim) the U.S. is in a recession.

This was an interesting week with news ranging from inflation to AI, tech struggles between the U.S. and China, and Tesla’s edge in terms of labor costs.

On Capitol Hill in Washington, Elon Musk, Mark Zuckerberg and Bill Gates and others worth an estimated $500 billion, according to Forbes, met for a closed-door Senate summit on AI.

Consumer prices rose 0.6% in August, the largest increase since June of 2022. An 11% jump in gasoline prices was the main problem, which led to a fall in average real earnings.

In today’s note, we discuss the recent earnings reports from Walgreens Boots Alliance (WBA). Our note also includes the monthly Catalyst Report and a summary of the January edition of the Cabot Turnaround Letter, which was published a week ago Wednesday.

A quick housekeeping note: with our offices closed next Thursday and Friday for Thanksgiving, we won’t be publishing the regular Weekly Update next week. I will, of course, send out Special Bulletins if/as needed. I hope you have a happy and healthy Thanksgiving!

On to the market.

Nvidia’s (NVDA) upbeat revenue forecast due to ongoing AI demand should help to tamp down bubble concerns today and possibly stanch the selling that pushed the S&P 500 and Nasdaq below their 50-day moving average lines earlier this week and inflicted the same damage on the S&P 600 SmallCap Index last Thursday.

Intel’s recently publicized struggles with its own chip production highlight the trajectory of this story. The company has been unable to successfully transition to leading-edge manufacturing technologies, and is seriously considering outsourcing to companies like Taiwan Semiconductor. Intel has long been the industry’s torch-bearer in chip self-reliance – with a strong aversion to using third party producers – so its change in mindset is a watershed event.