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Current Market Outlook


The major indexes actually made decent gains last week, though that came on the heels of a major breakdown the week before. In the short-term, last week’s show of support was encouraging; it could be the start of a multi-week bottoming process following the extreme selling pressure. If you want to trade stocks, taking small positions on dips could be worthwhile. However, remember that the bigger picture remains bearish—the major trends of the indexes are clearly down and most stocks have a ton of overhead supply to deal with. Thus, you should remain overall defensive, holding lots of cash and focusing more on building a watch list than trying to make a bunch of money here.

This week’s list has some steady growth stories as well as a few earnings winners from last week. Our Top Pick is Dycom (DY), a leading provider of construction services to the telecom industry, which is dramatically expanding its bandwidth. It’s not a long-term growth story but should be in great shape for at least another few quarters.

Stock Name	Price	Buy Range	Loss Limit
Vantiv (VNTV)	0.00	43-45	40-41
Under Armour (UA)	0.00	95-97	89-90
Tyler Technologies (TYL)	0.00	135-138	116-120
TransDigm (TDG)	599.41	224-232	213-215
Sarepta Therapeutics (SRPT)	120.93	35-36.5	30-31
Incyte Corporation (INCY)	76.98	116-120	96-100
Flotek (FTK)	0.00	18-19	16-17
Express (EXPR)	0.00	19-20	17.5-18
Dycom Industries (DY)	0.00	65-68	59-60
Buffalo Wild Wings (BWLD)	0.00	188-194	179-180

Intapp (INTA) reported another solid quarter after the closing bell yesterday, sending shares up around 15% today.

Commodity stocks have been (and remain) the leaders of the market’s advance, but interestingly, the tech-heavy Nasdaq has been outperforming all other major indexes for the past few weeks. Now, finally, some individual tech stocks are beginning to pop up—there are two chip stocks and one hard disk drive maker in this week’s Top Ten. We’re not ready to tell you to move a ton of money into technology sectors, but it’s a sign the rally is broadening out. Elsewhere in this week’s list, there are the usual suspects of oil, natural gas, steel and alternative energy. Our favorite of the week is Marvell Technology (MRVL), a chip firm that gapped up in a big way after its earnings announcement last Friday. We think you could nibble around here, although a drop of a point or two isn’t out of the question.

Stock Name	Price	Buy Range	Loss Limit
AMSC (AMSC)	0.00	30-33	-
CMI (CMI)	0.00	67-71	-
EAC (EAC)	0.00	65-70	-
GTI (GTI)	0.00	24-26	-
HK (HK)	0.00	27-29	-
MA (MA)	0.00	295-305	-
MRVL (MRVL)	0.00	15-17	-
NETL (NETL)	0.00	34-36	-
PCX (PCX)	0.00	100-110	-
WDC (WDC)	0.00	34-36	-

Using numbers alone is a mistake in evaluating growth stocks, particularly exceptional growth stocks like Apple.

The market has been inundated with bad news lately, but so far, the indexes are holding up relatively well, and we’re pleased to see the selling pressures on the broad market ease. (Our Two-Second Indicator is positive again.) We continue to believe the next major move will be up.

The rebound in emerging market stocks has given us a new buy signal. We’re going to complete our position in Weibo (WB) by buying another half position, and take a full position in NetEase (NTES).

With the market at all-time highs and the VIX at all-time lows, buying put options, betting the market would go lower, was too good to pass up.

It’s a new high! April was down. May was up. And June has been an up month so far. Hopefully, June will follow through and be another good month, but I’m still expecting a flatter market for a while.

The market goes back and forth with the interest rate narrative. But I don’t expect a resolution on that issue any time soon, or at least for the rest of the summer. Either the economy has to slow, or the Fed is going to at least leave rates where they are. But investors still insist on expecting rate cuts before the end of the year even though the economy looks strong.

This week’s Friday Update includes comments on our companies. There were no ratings changes or earnings reports.

Two stocks have rating changes today.

The recent bounce in emerging market stocks has raised hopes that the end might be near for the powerful correction that has hit EM stocks so hard. That may be the case, although the only sure way to tell is to watch the market’s action tomorrow and through the rest of earnings season and beyond. We’re certainly not going to do any predicting, just telling you what to do based on the action we see. The next few weeks will see quarterly reports from four of our stocks, and will also give us a sense of what the future leadership among emerging-market stocks will look like. In today’s issue, we have a South African company that’s becoming a global player in a software niche.