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The last two weeks have been a lot less fun than June and most of July. But big picture, a pullback is not remotely surprising.

Through yesterday’s close, both the large and small-cap indices were down about 2.6% from their recent highs. The Nasdaq was down almost 5%.

What is a little surprising is the rapid change of tone out there. This can be squarely blamed on Fitch’s downgrade of U.S. debt and Moody’s bearish notes on those 10 banks they think don’t look so hot.

OK, by now you’re probably sick about hearing of New Year’s resolutions; heck, Paul Goodwin even wrote about a few pointers a couple of weeks ago and Elyse Andrews discussed some in last weekend’s digests. Even so, I like to write down some New Year’s investing resolutions every January, and I think you might get a valuable nugget or two out of them. So here are 10 to consider, in no particular order. Adopt one of them, adopt them all--whatever works for you. But I’m hoping to adhere to all of them (and more) in the months ahead.

Lately, Canadian companies appear clearly undervalued and offer excellent appreciation potential during the next one to three years.

The major indexes continue to hit new highs, all Cabot’s market timing indicators remain positive, and our portfolio is solid, with no particular worry spots today.

Of course, that will change, and when it does, we will adjust our stance, but there’s no predicting where the trouble will come from, so for the moment we’re standing pat with our portfolio, making no changes.

As for today’s new recommendation, it’s in a traditional industry, but growing fast thanks to acquisitions—and on a pullback right now that offers an attractive entry point.

Details in the issue.

Last week we sold four stocks from the portfolio, clearing away the weakest stocks and giving us some breathing room (and cash), so this week there is no need for more selling But I do have two downgrades to hold (CSCO and SE).

As for today’s recommendation, it’s a household name whose stock is temporarily on sale—and you get a nice dividend too.



Details inside.

The market remains quite weak, and thus ripe for a major rally at any time. But until we see real strength, continued caution is advised.
And today’s recommendation fits the bill, as it has a solid dividend and the prospect of real growth as the global energy industry adjusts to a world without Russian oil.


As for the portfolio, we’re selling one laggard, which is suffering as consumers cut back on discretionary spending.

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

While mega-cap tech stocks have seized all the headlines, these five stocks have quietly established themselves as the best-performing stocks so far this year.

Today, I tackle a few notable questions from readers that are probably indicative of wider sentiment.

Cabot’s market timing indicators show that the intermediate- and longer-term trends of the market are both up, so you can continue to put money to work judiciously. We have one ratings change today—PGX to Hold—but most of our holdings were very quiet over the past week.

Ahead of the “big” Federal Reserve announcement on Wednesday, the market surged higher last week.

“Too big to fail” has warped capitalism—privatizing profits, socializing losses, and eroding trust in markets and democracy. But it can be fixed.

It’s not the news that matters, it’s the REACTION to the news that counts.

Why this question doesn’t matter when investing in the stock market.

Stock investing is just like golf in every way that matters. Markets are completely impartial and their rewards and punishments are meted out with an even hand. They cannot be mastered. You can make two investments that seem exactly the same to you and yet one will deliver a sack of cash and another will turn into a box of rocks. Just as in golf, the most important question in investing is “What are you going to do next?” In both golf and investing, sometimes you go for the big shot and sometimes you play it safe. But whining about conditions won’t help you a bit. And just like golf, investing requires you to know your own temperament and limitations and the current conditions on the course and play accordingly if you’re going to make money.

There was a lot going on in the market this week but news flow from our portfolio holdings was relatively quiet.

The iShares EM Fund (EEM) has rebounded sharply and is well above both its 25- and 50-day moving average. That keeps the Buy signal in the Cabot Emerging Markets Timer shining brightly. We have one rating change tonight.

Ever since the story broke last week that Bernard Madoff had lost perhaps $50 billion of investments entrusted to him by friends, hedge funds, charities, etc., I’ve been looking for the answers to a few questions. When and how did it first go wrong? Was there one leveraged investment that went bad back before 1999, when the SEC first “investigated”? Did he dig himself out of that hole only to fall into another one or has he been producing bogus statements steadily since then? Who on the inside of the company was aware of the fraud? And what was the conversation like between father and sons before they turned him in? One thing is clear; the man will now find out who his true friends are.

The ridiculously poor sentiment of the last few weeks leads me to believe the market’s next big move is up.