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The cannabis sector remains in a correction, with both marijuana and CBD stocks trending lower, giving up some of their early-year gains—and perhaps building a bottom here.

In the meantime, more and more peripheral companies are getting in on the action, and we have been increasing our exposure to these in recent weeks while still holding substantial cash.

This week we’re selling one more of the pure-play marijuana companies, raising the portfolio’s cash level to about 27%.

Full details in the issue.

The Emerging Markets Timer is right on the fence, as the MSCI Emerging Markets Fund (EEM) is just a hair below its 50-day moving average, but still well within its recent trading range. Earnings season has claimed its first victim among our holdings, but the portfolio remains in good health. Tonight we’re selling Line Corp. (LN) and moving Tata Motors (TTM) to a Hold.

As you pour over stock websites and ponder which stocks you might like to buy in the coming weeks, think hard about how badly these companies might be harmed by the cessation of public gatherings.

Small caps had a decent week with the S&P Small Cap 600 ETF (IJR) rising just over 2% since our last update. This is a welcome relief on a number of levels, including from a technical perspective.

In late July the ETF looked like it was going to challenge the year’s high (from February) near 108. Momentum stalled at 105 as the calendar turned to August. By the 18^th (two weeks ago) the IJR was just below 100, sitting on its 200-day moving average line.

Holding cash is not a successful long-term investment strategy, especially where inflation reduces the value of cash.

Current Market Outlook


The market had another decent week, with the major indexes finishing above key moving averages, though all are still stuck in multi-month ranges. But the calm action hid another round of vicious rotation beneath the surface, with most growth-oriented stocks at least taking on water, if not unraveling altogether. With few stocks in sustained uptrends and the major indexes effectively trending sideways, we continue to advise a mostly cautious stance, with small new positions and plenty of cash on the sideline. That said, you shouldn’t stick your head in the sand, either—we continue to see a good number of setups out there, and we believe a lot will come down to earnings season. A spate of breakouts would be encouraging, but as usual, we have to see it first.

This week’s list is mostly full of the steady growers and special situations that the market is favoring these days. Our Top Pick is Tempur Sealy (TPX), which looks like a solid turnaround situation, with surprisingly big growth numbers to boot.

Stock Name	Price	Buy Range	Loss Limit
Arconic (ARNC)	17.00	26-27	24-24.5
Cabot Microelectronics (CCMP)	156.17	143-148	129-131
Fastenal (FAST)	37.08	35-36	32-32.5
Kansas City Southern (KSU)	176.54	140-144	129-131
Nike (NKE)	89.77	92.5-94.5	85-86
Taiwan Semiconductor (TSM)	78.41	48-50	44-45
TAL Education (TAL)	50.49	38-39.5	34.5-36
Target (TGT)	124.77	109-112	100-102
Tempur Sealy (TPX)	85.53	79-82	71.5-73.5
TJX Co. (TJX)	59.24	58-60	53.5-54.5

Current Market Outlook


The market came close to giving an all-clear signal last week, but the endless U.S.-China trade flareup knocked the market back on Friday. Despite the headlines, we still don’t see the environment as a total disaster—the indexes themselves are still holding above their recent lows, and many individual stocks (and most we’re following) are actually more resilient than that. But the bottom line is that little money is being made, and with the intermediate-term trend continuing to point down, you should remain in a cautious stance, keeping new buying on the small side and holding some cash. From here, we’re open to anything—given the pervasive pessimism, a new uptrend wouldn’t shock us, but the onus remains on the bulls to prove they are retaking control before we become more constructive.

This week’s list has a wide mix of stocks that have resisted the market’s downward pull—with some actually advancing despite the environment. Our Top Pick is MasTec (MTZ), a stock we missed a couple of weeks ago but think it can have a sustained advance due to its exposure to many strong markets.

Stock Name	Price	Buy Range	Loss Limit
Allakos (ALLK)	77.83	80-84	66-69
Blackstone Group (BX)	49.12	47.5-49.5	42.5-43.5
D. R. Horton (DHI)	66.55	48-49.5	44.5-45
HubSpot (HUBS)	582.89	196-200	178-182
Keysight Technologies, Inc. (KEYS)	97.20	92-95	83-85
LivePerson (LPSN)	58.55	37-39	33-34.5
MasTec, Inc. (MTZ)	66.65	59-61	53.5-54.5
Pinduoduo (PDD)	87.53	28-30	24-25.5
Synopsys (SNPS)	137.53	133-137	122-124
Target (TGT)	124.77	101-105	91-93

Current Market Outlook


After a modest rise last week, the market’s story remains the same—the intermediate- and longer-term trends continue to point up, and leading stocks remain in favor, with a ton gapping up on earnings during the past three weeks. It’s not all good news, of course—the broad market has again turned iffy by a few measures, and the environment is a bit giddy right now as investors count their profits. Thus, we won’t rule out a healthy pullback in the major indexes or some rotation among various stocks and sectors. But at day’s end, we always go with the market’s primary evidence (trend, price/volume, etc.), and today that evidence is solidly bullish, so we are, too.

This week’s list is heavy on small- and mid-sized companies, though a variety of sectors are represented. Our Top Pick is Universal Display (OLED), a leading glamour stock that just soared on earnings after about five months of no progress. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Axcelis Technologies (ACLS)	0.00	31.5-33.5	28.5-30
Conn’s Inc. (CONN)	0.00	29.5-31	26.5-27.5
EPAM Systems (EPAM)	188.24	96-98.5	90-92
Insulet (PODD)	175.69	66-69	60.5-62.5
Neurocrine Biosciences (NBIX)	123.40	70-73	63.5-65.5
Old Dominion Freight Line Inc. (ODFL)	221.91	115-119	106-108
PBF Energy (PBF)	38.93	30-31	27-28
Trex Company (TREX)	117.56	100-105	92-95
TRI Pointe Group Inc. (TPH)	0.00	16.5-17.2	15-15.4
Universal Display (OLED)	187.54	154-160	137-140

The big question on investors’ minds is if this tech stock retreat is a precursor to something larger or a “normal” correction in the context of a bull market.

This morning, the company reported third quarter earnings per share of $0.41 vs. the consensus estimate of $0.42 (August year-end), and revenue of $1.2 billion vs. the expected $1.29 billion.

Behavioral studies have shown that when we buy or sell a stock, these factors play a prominent role in our decision.