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After a modest bounce in May and early June, another thunderstorm has hit the market, driving the indexes and most stocks to fresh lows. Of course, the Federal Reserve is on everyone’s mind these days, but really, you don’t need to guess about what they’ll do and what effect it will have--just following the market’s trends has kept us mostly on the sideline in recent weeks and months, and they’ll be your best guides going forward. In the meantime, we’re actually trimming one of our two positions tonight, but we’re keeping our eyes open for signs the buyers are putting up a fight.



In tonight’s issue, we write about the energy sector, our current holdings and a few new ideas, too. We offer no predictions and remain mostly safe on the sideline, but the environment is certainly ripe for a turn given how everyone’s predicting doom, so it’s important to keep your head up and be ready should the evidence improve.

This week, as we continue to keep the portfolio diversified, we are adding a biotech/pharma play that recently reported strong earnings.

Despite some optimism early last week, the sellers obliterated that hope Wednesday through Friday, as the indexes fell sharply, pushing the S&P 500 into an official bear market (down 20% from its highs).

This week we are adding a covered call in yet another earnings season winner that has emerged amidst the rubble of the retail sector.

As Mike Cintolo, Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader always says, “you shouldn’t fight the tape.” The markets are battling it out these days, trying to find a bottom. The constant news cycle of Russia-Ukraine, rising rates (up 0.5% last week) and increasing inflation are causing a severe case of market indigestion and volatility.



What’s an investor to do? As I’ve been saying for the past 6 or so months, judicious investing is the key. While most sectors (except Energy and Utilities) and the majority of equities, are down for 2022, there are still pockets of ideas worth investigating, including some defensive moves.



With that being said, I think investors should be keeping some cash on the sidelines, as when this market shows signs of a long-term turn, there will be plentiful bargains to be had.

During the past couple of weeks, we’ve seen the major indexes push higher (including new all-time highs from the S&P 500), we’ve seen some growth stocks get off their duffs and we’ve seen a gradual improvement in stocks and sectors hitting new highs. In other words, the evidence has improved, and while we would prefer to see some real buying power (volume has been whisper-quiet for the most part), we’re tilting our Market Monitor a bit toward the bullish side. Bottom line: It’s OK to put some more money to work here, and then see if stocks can build on their recent gains.

This week’s list has a broad array of solid stories from a variety of industries. Our favorite is BitAuto (BITA), a great (and easy to understand) Chinese growth story that is quickly rounding out its launching pad.

Stock Name	Price	Buy Range	Loss Limit
Stillwater Mining (SWC)	0.00	16-17	14.5-15
Skechers (SKX)	0.00	41-43	38-39
Live Nation Entertainment, Inc. (LYV)	0.00	23-24	21.5-22
Kate Spade & Company (KATE)	0.00	35-36.5	32-33
ICICI Bank (IBN)	0.00	48-50	44-45
Electronic Arts (EA)	0.00	33-35	30-30.5
Dillard’s (DDS)	0.00	106-112	99-100
Ctrip.com International Ltd. (CTRP)	34.94	53-55	48-49
Bitauto Holdings (BITA)	0.00	42-44	37-38
American Airlines Group Inc. (AAL)	0.00	38-40.5	36-36.5

Current Market Outlook


The Nasdaq poked above the 5,000 level for the third time in six weeks today, and most other indexes aren’t far behind. To us, what’s distinctive about the recent upmove is a complete lack of selling—very few stocks are hitting new lows, and even bad news has failed to attract the bears. Now, to be fair, buyers aren’t exactly flexing their muscle, either; not many stocks are hitting new highs and volume’s been generally light. Overall, we’re going to keep our Market Monitor where it is because the sideways trend of the market is still intact, but we do think there’s a good chance the third time could be the charm as the Nasdaq tests new high ground.

This week’s list has a bunch of good prospects, including some from unexpected areas (energy and yieldcos!). But our Top Pick is Valeant Pharmaceuticals (VRX), a steady grower in the drug field that should see earnings accelerate thanks to its recent acquisition of Salix.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	200-210	188-190
Terraform Power (TERP)	0.00	38-40	35-35.5
Sabre Corp. (SABR)	0.00	24.5-25.5	22-22.5
PDC Energy (PDCE)	0.00	53-55	49-50
Orbital ATK (OA)	0.00	74-76	67-69
JD.com (JD)	39.58	33-34.5	30-31
Intercept Pharmaceuticals (ICPT)	0.00	270-285	245-250
Harman International Industries, Inc. (HAR)	0.00	134-139	124-126
Canadian Solar (CSIQ)	0.00	34-36	30.5-31
Autohome (ATHM)	98.65	46.5-49.5	42-43

We remain in a confirmed bear market, so caution is still appropriate.
But there’s always something interesting to consider buying, and this week’s recommendation is a young stock with a good story, which involves helping the oil and gas industries use water more efficiently.


As for the current portfolio, which is 25% in cash, there’s one Sell.


Details in the issue.

This month we go back to the MedTech well and pull out a small company with a potentially transformative technology that could shake up the organ transplant market.

With recent FDA approvals and a platform that appears to be head and shoulders above the standard of care, this company is enjoying rapid revenue growth now.



Enjoy!

The first half of 2022 came to a close last week, and the numbers weren’t pretty; the S&P 500 fell 20%, the Dow was lower by 15% and the Nasdaq declined by 30%. How the second half of the year will play out is anyone’s guess. However, until stocks show any real signs of sustained momentum, I will continue to keep the portfolio diversified, and will lean defensive with our options selling strategy