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Current Market Outlook


Not much happened last week, with the major indexes up a fraction of a percent and most leading stocks in a similar boat. But to us, that was a good thing—the fact that stocks held up following the prior week’s romp higher and a bunch of bad news (Iran tensions) and upcoming uncertainties (Fed meeting and G20 powwow) at least shows sellers didn’t pounce on the opportunity to bail. As we wrote last week, there’s more positive evidence than negative evidence, which is why we’re leaning bullish—but the intermediate-term trend of the major indexes and many stocks and sectors has yet to turn positive, so we’re also not pounding the bullish drums. Holding your strong stocks and nibbling on some good-looking charts is fine by us, but we also advise sitting with a chunk of cash and patiently waiting to see if the market can follow through on its recent strength.
This week’s list is a bit broader than those we’ve seen recently, with a lot of good charts and growth stories. Our Top Pick is Blackstone (BX), which has shown great power of late.

Stock Name	Price	Buy Range	Loss Limit
AngloGold Ashanti (AU)	20.45	14.6-15.4	13-13.5
Blackstone Group (BX)	49.12	42-44.5	38-40
Boot Barn (BOOT)	43.24	31.5-33.5	27.5-29
Casey’s General Store (CASY)	165.73	148-153	136-138
Haemonetics (HAE)	136.59	107-111	98-100
Innovative Industrial Properties (IIPR)	214.38	104-110	91-94
Mirati Therapeutics (MRTX)	104.98	94-98	81-83
Penumbra Inc. (PEN)	173.25	161-166	147-150
Trade Desk (TTD)	468.02	237-244	212-215
Universal Display (OLED)	187.54	169-175	153-156

Current Market Outlook


Last week was the third straight down week for the major indexes. More importantly to us, all remain clearly below their 50-day moving average. That keeps the intermediate-term trend pointed down, which combined with some soggy action from key groups (oils and chip stocks look like death) is a good reason to remain relatively cautious. Of course, not all is bleak—the longer-term evidence is still positive, and most leading stocks are in decent shape (though many did take on water last week). Overall, then, the song remains the same: We advise holding most of your strong, profitable stocks, but also holding a good-sized chunk of cash and being very choosy on the buy side. The onus remains on the bulls to retake control—until then, step lightly.

This week’s list has another strong group of stocks; a nibble here or there is fine, or simply put your favorites on your watch list. Our Top Pick is Array Biopharma (ARRY), which emerged on big volume last week, and it helps that many biotech names are acting resiliently.

Stock Name	Price	Buy Range	Loss Limit
Array Biopharma (ARRY)	46.35	25-26.5	22.5-24
Ascendis Pharma (ASND)	119.09	123-128	112-115
Copart (CPRT)	74.80	69-71	63.5-64.5
GW Pharmaceuticals (GWPH)	174.52	177-183	162-166
Legg Mason Inc. (LM)	37.44	35-36	31.5-32.5
PulteGroup (PHM)	45.93	31-32	28.5-29.5
RingCentral (RNG)	238.73	116-120	106-108
Sea Limited (SE)	132.86	27.5-29.5	24.5-25.5
Viasat (VSAT)	81.22	90-92	83-84.5
Wix.com (WIX)	302.53	132-136	121-123

We may look to exit a few positions on strength over the coming weeks/months, but those moves will depend on share price momentum and/or earnings results. More companies have announced their earnings release dates, and three companies report next week. We have no ratings changes this week.

The last two weeks have been a lot less fun than June and most of July. But big picture, a pullback is not remotely surprising.

Through yesterday’s close, both the large and small-cap indices were down about 2.6% from their recent highs. The Nasdaq was down almost 5%.

What is a little surprising is the rapid change of tone out there. This can be squarely blamed on Fitch’s downgrade of U.S. debt and Moody’s bearish notes on those 10 banks they think don’t look so hot.

Welcome to this week’s Cabot Macro Investor update.

I’m joking. We’re still all about small-cap stocks. But now that earnings season is over it’s all about the macro again. So we’ve got to address it.

In the second half of July, I felt like we were due for a pullback.

Current Market Outlook


The big-cap indexes started strong today on news of a new NAFTA deal, but under the surface, we’re seeing continued rotation and signs of degradation. Small- and mid-cap indexes took hits today and remain below their 50-day lines, while most growth stocks continue to act iffy. To be fair, the start of a new quarter often sees many crosscurrents, and most leading stocks, while choppy, remain in uptrends. But we’ve now seen funky action and lots of rotation for over a month, which has our antennae up. We’re moving our Market Monitor to a level 6 and feel the next few days will be telling—if leaders are OK, we expect to see support show up, but if not, the odds of a longer pullback will increase.

As for our screens, we’re still finding a good number of good charts, albeit in a variety of sectors. Our Top Pick today is Allegheny Technologies (ATI), a specialty metals firm that is showing signs of getting going after months of base-building.

Stock Name	Price	Buy Range	Loss Limit
Alarm.com (ALRM)	71.33	55.5-57	51-52
Allegheny Technologies (ATI)	27.78	28.5-30	26-27
Ecopetrol (EC)	22.17	25.5-27	22.5-23.5
Intelsat (I)	25.46	27-29	24-25
Paycom Software (PAYC)	0.00	145-150	136-139
PetIQ (PETQ)	30.82	36-38	33-34
Teladoc, Inc. (TDOC)	127.95	79-83	70-73
Vale S.A. (VALE)	15.40	14.5-15	13.2-13.6
WPX Energy (WPX)	0.00	19.3-20.2	17.4-17.9
Zendesk (ZEN)	82.19	67-70	61.5-63.5

Utilities have long gotten a bad rap as being stale and slow, but the emergence of artificial intelligence has upended that narrative, and the best utility stocks are now moving like growth stocks.

Another year is coming to an end. It was a crummy year for the market. The current roughly -20% YTD return for the S&P 500 with two days left marks the worst yearly performance for the market since 2008.


Although it’s been a tough year for stocks, history strongly suggests that 2023 should be a lot better. In the last 42 years, there have only been 7 calendar years of negative market returns and 35 years of positive returns. Of those 7 negative years, 5 were followed by years when the market rebounded at least 20%.

The market just keeps marching higher despite increasing skepticism.

Now, unlike Wellcare Group, Crocs still has an excellent growth business, and we still have high expectations for the company. But we don’t confuse the stock with the company, and we never argue with the stock. CROX, like WCG, is heavily damaged. Every rally from here will be met with selling pressures from investors who bought higher who will now be content to “get out even.” And thus it’s highly unlikely that this stock will return to its winning ways in the near term. So we say sell.

This Market. March Issue Moved to the 26^th

Another week, another all-time high for the S&P 500 and Dow, while the Nasdaq is slowly creeping towards its previous highs. By week’s end the S&P 500 had gained 0.6%, the Dow had rallied 1%, and the Nasdaq had risen marginally.

Another week, another all-time high for the S&P 500 and Dow, while the Nasdaq is slowly creeping towards its previous highs. By week’s end the S&P 500 had gained 0.6%, the Dow had rallied 1%, and the Nasdaq had risen marginally.

The cannabis sector is taking a severe body blow because of election outcomes.

The big negative: Florida voters rejected Amendment 3, which would have legalized recreational use. Voters in North Dakota and South Dakota also rejected cannabis legalization.

Explorer stocks gained or held their ground this week as the so-called “Mega-Cap 8” stocks dominate a narrow market for now.

China has become the 20% market – 20% of world GDP and 20% of multinational total revenue. This explains the steady stream of CEOs to China while Washington and Beijing top officials traded insults at a Singapore defense forum.