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The story remains mostly the same, with the overall market remaining in great shape, though it is a bit near-term extended, while growth stocks are good-not-great, with a lot of names mostly marking time, and even some AI names doing the same. That said, we have seen a little broadening of leadership of late, which should provide some opportunities down the road. Today we’re adding one new half-sized stake in a name that looks to have changed character today (up a lot, but this comes after a two-month correction), but we’re still going to hold 38% in cash as we look for more titles to get going.

The market finished solidly in the black thanks to a strong end to last week; interestingly, while the intermediate-term trend is still neutral overall, a couple of broad up days from here could kick it into the green. Even better is the action of leading stocks, with more names emerging and, importantly, more names holding their recent upmoves. To be clear, there’s still a lot of proving to do, but overall, we think the evidence has taken another step in the right direction—we’ll move up our Market Monitor to a level 6 and see what comes from here.

This week’s list has a ton of strong names and other good setups that could lift should the market continue to improve. Our Top Pick looks like the leader of the improving cybersecurity group, having lifted out of a long consolidation. Dips should be buyable.

After being unable to get off its knees for more than a few hours, the market staged a rally during the past two days, which is always good to see. That said, while the Nasdaq is looking halfway decent (back above its 50-day line today), the other major indexes are still in rough shape, and the broad market is still iffy. Now is certainly not the time to be complacently negative—it’s not like every stock is in tatters and the major indexes are in bear phases. But after the toppy action in July and decisive break two weeks ago, we need to see more than just a couple of mild-volume rallies to put a bunch of money back to work. Thus, you should remain generally defensive as we patiently wait for the bulls to re-take control.

The good news is that many growth stocks (and a few turnarounds) continue to act well—not much money is being made but many names are building solid bases. Our Top Pick this week is Under Armour (UA), an emerging blue chip stock that, while not early in its advance, is in great position after a beautiful base and breakout.

Stock Name	Price	Buy Range	Loss Limit
58.com (WUBA)	0.00	50-51	47-48
Vipshop Holdings (VIPS)	14.25	210-214	200-203
Under Armour (UA)	0.00	66-70	62-63
Tenet Healthcare (THC)	0.00	55-57	51-52
Royal Gold, Inc. (RGLD)	129.66	77-79	72-74
NRG Yield (NYLD)	0.00	51.5-53	49-50
NorthStar Realty (NRF)	0.00	17.5-18	16.5-17
Lithia Motors Inc. (LAD)	146.30	90-92	84-85
Dexcom (DXCM)	421.36	41-43	37-38
Arista Networks (ANET)	0.00	70-74	64-65

Worried about another market correction? This bit of options education should help you learn how to hedge your portfolio using puts.

Amazon and Pinterest are two great, revolutionary companies. But I wouldn’t buy either stock today. That could change in a few days...

Worried about another market correction? This bit of options education should help you learn how to hedge your portfolio using puts.

There are several rating changes today due to earnings.

At Cabot, we believe education is a key component of successful investing. Today I’m going to review my system for picking growth stocks, which I’ve discussed in this space before. I call it SNaC, for Story, Numbers and Chart, and it’s the method I use to choose stocks for the Cabot China & Emerging Markets Report.

Put a little money to work. There are still issues with many growth stocks and plenty of crosscurrents, but the overall market is looking good and we have seen some earnings-induced breakouts.

Current Market Outlook


We’re eight and a half months into 2014, and it finally looked as if the choppy (four weeks up, four weeks down, etc.) type of environment had been left behind. But not yet! Just during the past couple of trading days, we’ve seen the market churn near its highs and the sellers come out of the woodwork. We can’t conclude at this point that the market is set to sink for a few weeks; the evidence doesn’t support that. But given that sustained trends have been hard to come by, we also continue to think holding some cash on the sideline and booking partial profits makes sense. We’ll keep our Market Monitor in a “lean bullish” position, but we’ll be watching the upcoming action closely. If the uptrend is OK, buyers should show up soon.

This week’s list has a broader array of stocks and sectors on it, with a few stable stories. Still, we’re going with a true growth stock as our Top Pick—Palo Alto Networks’ (PANW) quarterly report was a barnburner and the stock soared to new highs on record volume. And we think its pullback since looks normal.

Stock Name	Price	Buy Range	Loss Limit
WhiteWave Foods (WWAV)	0.00	34.5-36.5	32-33
United Therapeutics (UTHR)	0.00	118-123	105-107
TriQuint Semiconductor (TQNT)	0.00	19-20	17-18
Gentherm (THRM)	0.00	47-49.5	44-45
Palo Alto Networks (PANW)	236.92	94-98	86-88
Monster Beverage Corporation (MNST)	0.00	86-89	78-80
Southwest Airlines (LUV)	0.00	32-33	29-30
Jazz Pharmaceuticals (JAZZ)	0.00	154-162	145-148
Greenbrier (GBX)	57.73	67-70	63-64
Foot Locker (FL)	0.00	55-57	52-53

With the right options strategy you can not only buy AAPL stock for a big discount but you can get paid for it while you wait too!

We recently received a very interesting proposal from a Cabot Wealth Advisory reader who suggested an essay contest with a subscription to a Cabot newsletter as the prize for the best entry. We have never done such a contest, but the reader had obviously thought through the details, and made a very persuasive case. And we liked the idea so much that we’ve decided to hold the contest! We love competitions and we like the idea of asking Cabot Wealth Advisory readers to share their stories and we think others will enjoy reading them. The entries will give us an opportunity to get to know you better, dear reader. And the winner will have a chance to get back into the market with our best advice because the prize is a FREE one-year subscription to a Cabot newsletter!