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Despite a few intraday wobbles, it’s shaping up to be yet another positive week for the major indexes—as of Friday morning, both the S&P and Nasdaq are up in the 2% range (give or take).

This week is shaping up to be the mirror image of last week, as stocks have soared from the get-go, with the major indexes quickly surging back toward the highs of their 10-week ranges.

The good news of this week’s action is that the intermediate-term trend, which was on the fence a week ago, is in much better shape—all five major indexes we track are solidly above their lower (50-day) moving averages, and it would probably take a 6% to 7% drop from here to threaten the uptrend.

Following last week’s vicious rotation, this week has been refreshingly quiet. As of Friday morning, both the S&P 500 and Nasdaq are nearly unchanged on the week (up a smidge). Considering we’ve had some worrisome headlines (especially the Saudi oil attacks), we take this calm action as a good thing.

I can’t say for sure that it’s insider trading (if it quacks like a duck...) but following this unusual option activity is a winning strategy.

The market remains in a correction, and with the intermediate-term trend pointed down, we’re still advising a cautious stance. That said, we do think the pieces are in place for a new advance, from positive longer-term evidence, a big dip in sentiment and bullish action from many leading growth stocks.
In tonight’s issue we review all of our stocks, fine tune our watch list and we also look at the medical sector, which we think could be a leadership area going forward for a few reasons.

Current Market Outlook


The market rebounded nicely today, and we won’t pooh-pooh that, as a show of support is always a positive. That said, we need to see more to conclude the sellers have left the building—the intermediate-term trend, for instance, remains on the fence, and while there are no sure things, it’s likely the market will need more than six days to consolidate a four-month advance. Bigger picture, nothing has changed our view that this is a bull market, though, so we’re certainly not advising you to become overly defensive, but we’d stick with the plan of holding some cash, keeping your weakest stock or two on a tight leash and being careful on the buy side, especially when it comes to buying on strength (most moves to new highs are being met with selling). Our Market Monitor will remain at 6 for now, though we’re obviously watching things closely.

Believe it or not, many stocks did well last week, and today’s list features some of them. Our Top Pick is Yeti (YETI), which is set up nicely ahead of earnings in two weeks; you could nibble here, or just wait until you see a powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	182.16	143-147	133-135
Dynatrace (DT)	36.59	28-30	25-26
Fortune Brands Home & Security (FBHS)	81.02	67.5-69.5	63-64
Franco-Nevada (FNV)	125.51	108-111	100-101.5
Momenta Pharma (MNTA)	31.63	27.5-30	23.5-25
Penn National Gaming (PENN)	45.38	28-30	25-26
PulteGroup (PHM)	45.93	43.5-45	40-41
ServiceNow (NOW)	341.86	328-336	303-306
Tandem Diabetes (TNDM)	74.77	73-76	65-67
Yeti Holdings (YETI)	42.80	35.5-37.5	32.5-33.5

Growth stocks had been improving some, but the sellers never quite disappeared, and now they’re back with a vengeance—many growth-oriented measures are down 6% to 10% this month alone, and even the broad market is going along for the ride.

Thankfully, we never got heavily invested given the indecisiveness, and now we’re throwing up some safety nets—we sold one stock yesterday (giving us more than half in cash) and put two others on hold.



Despite the selling, we’re not throwing in the towel—we see a ton of decent setups still, so if earnings season goes well, there could be some liftoffs. But for now we’re remaining cautious until things change for the better.

In the May Issue of Cabot Early Opportunities, we spread things around, taking a look at a rising MedTech star, a possible breakout biotech stock, a boring discount retailer, an oil and gas income play and a familiar apparel manufacturer.
Enjoy!

The market remains relatively mixed from a top-down perspective, but growth stocks remain a different story -- some still look fine, but the action is very hit or miss, and recently, more have come under pressure, with air pockets appearing all over the place this week. That doesn’t portend doom -- in fact, some things like sentiment are encouraging, and the indexes aren’t in bad shape -- but we’ve pared back this week and will look to reinvest the proceeds once big investors decisively step up to support growth stocks.

The market has been wild in recent days, giving investors very mixed messages—on one hand, many leading growth stocks have broken down, but on the other, the broad market is strengthening, with our Cabot Tides actually flashing a new green light. Given the crosscurrents, we’re taking things on a stock-by-stock basis, selling stocks that are cracking support and looking for new buys among fresh leadership.

The stock market reached yet another record high on Monday, but it just doesn’t seem the same as earlier records. Investors (and everyone else) is starting to wonder if Covid is now endemic – an inherent component of everyday life. Will cases surge in the winter months and just after holidays instead of going away with a single vaccine cycle? We won’t likely be going back to widespread lockdowns, but previously unfettered socializing and traveling could be restrained, thus suppressing earnings and valuations for many companies.

The GameStop Affair last week offered great entertainment for those of us neither long nor short the stock, but in the end what does it mean? In my opinion, the market worked; I don’t see any real problems revealed (aside from naivety of many of the individuals). But I do think the spotlight on the power of individuals vs. professionals is likely to bring some legal outcome that will further empower individual investors, especially given today’s Democratic control of Washington.

Two portfolio stocks reported earnings today.

It’s been a relatively quiet week in our portfolio so there aren’t many stock-specific updates to cover.

Three stocks are updated due to Earnings Reports.