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Current Market Outlook


As each week has passed, we’ve seen more and more yellow and red flags, including divergences, an implosion in the broad market, and recently, some key leading groups (like chip stocks) and individual stocks break down. There are still some positives out there, especially that many growth stocks remain within multi-month consolidations; if the market pulls out of its funk, they could be the leaders of the next advance. But, right now, that’s a big if—with selling pressures intensifying, we’re knocking our Market Monitor down another notch. Holding cash and being very choosy when doing some buying is your best course.

This week’s list has a larger-cap flavor to it as investors hunker down in well-traded names. Our Top Pick is Nike (NKE), which recently staged a huge gap on earnings, something that almost always leads to good performance in institutionally-owned stocks.

Stock Name	Price	Buy Range	Loss Limit
Ulta Beauty (ULTA)	331.95	113-117	105-106
Nike (NKE)	89.77	86-89	82-83
Monster Beverage Corporation (MNST)	0.00	88-92	83.5-84.5
Mallinckrodt (MNK)	0.00	89-92	83-84
Home Depot (HD)	0.00	90-93	85-86
Keurig Green Mountain (GMCR)	0.00	128-132	119-121
FedEx (FDX)	0.00	156-161	150-151
Carter’s (CRI)	0.00	81-83	76-77
Acuity Brands (AYI)	0.00	128-132	120-121
Actavis (ACT)	0.00	238-243	222-224

Current Market Outlook


Our job as investors isn’t to forecast where the market will be in two or three months, but to follow the current evidence and stay on the right side of the market’s trends. The intermediate-term trend turned positive last week for the first time in more than two months, so it’s time to take a couple of steps back into the market’s waters by purchasing some strong stocks with big potential. That said, it’s best to go slow, partly because the longer-term trend remains down, and partly because many stocks are still repairing the severe damage they suffered in recent months. Our Market Monitor remains in neutral territory, and we’ll be looking for more bullish action from leading stocks to tell us to shift to a more aggressive stance.

This week’s Top Ten has a bit more of a growth flavor, which we like to see, with many stocks expected to grow earnings nicely. Our Top Pick is Texas Roadhouse (TXRH), a full-service restaurant operation that should see its bottom line accelerate this year. Even better, the stock just exploded out of a multi-month base.

Stock Name	Price	Buy Range	Loss Limit
WellCare Health Plans, Inc. (WCG)	271.83	87-90	82-83
Texas Roadhouse (TXRH)	0.00	40.5-42	36.5-37
Stamps.com (STMP)	0.00	112-117	106-107
Sprouts Farmers Market (SFM)	19.00	26-27.5	23.5-24
Motorola Solutions (MSI)	0.00	71-73	66-67
Mellanox Technologies (MLNX)	92.00	49-51	45-46
Lennox International (LII)	270.56	127-129	120-121
First Solar (FSLR)	83.74	68-70	60-61
Franco-Nevada (FNV)	125.51	57-59	52-53
()	0.00	-	-

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