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Recent bullish movement in Chinese stocks is being confirmed by bullish momentum in gold. That’s good news for both.

Sell Terex (TEX)

We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL

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Current Market Outlook


In true 2021 fashion, just when the market looked ready to go over the falls last week the buyers stepped in, pushing the major indexes sharply higher (recouping nearly 50% of the month-long correction in just three days and seeing many individual stocks pop as well). It’s certainly encouraging, but we need to see a bit more—by our measures, we haven’t seen confirmation of a new intermediate-term uptrend (most indexes remain below their 50-day lines or stuck in the middle of multi-month ranges) and, while a few stocks have popped to new highs, most individual names are in the same no-man’s-land environment. Longer term, the strong, broad bounce is a good sign the overall bull market is alive and well, but near term, it’s still uncertain whether we’ll see another leg lower or more vicious rotation. You shouldn’t be in your bunker, but keeping new buys small and holding some cash makes sense as we see if the strength can persist.

This week’s list is heavier on turnaround and commodity-related names, with many beginning to emerge from long rest periods. Our Top Pick is LPL Financial (LPLA), which won’t be your fastest mover but has staged a good-looking breakout in recent weeks.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	206	203-210	182-185
Applovin (APP)	87	83-86	73-74.5
Builders FirstSource (BLDR)	55	54.5-56	49-50
The Goodyear Tire & Rubber Company (GT)	19	18-19	16.3-16.8
Hilton Worldwide Holdings (HLT)	143	139-142	126-128
LPL Financial Holdings (LPLA)	167	165-169	148-150
The Mosaic Company (MOS)	42	39-41	35-36
Pioneer Natural Resources (PXD)	193	187-192	165-168
Teck Resources Limited (TECK)	28	26-27.5	23-24
UPST (UPST)	311	285-300	240-250

Cree Inc. (CREE) is a leader in the production of light emitting diodes.

How about this market? Even with the technology sector still in a funk and the huge energy sector rally abating, the S&P 500 just made a new all-time high anyway.

I’m an optimist. That quality has served investors well for decades. There are many stocks at cheap prices that will likely be a lot higher in a year or two as a new bull market will emerge. But I don’t believe that the market is on its way to the Promise Land just yet.

What a difference a few weeks can make. The S&P 500 has moved up 15% from the low of October. Have we turned the corner on this bear market?

The main catalyst is a slower-than-expected inflation report. While still unacceptably high, inflation showed real signs of slowing in October. That means the Fed could be done hiking rates sooner. The chief cause of this bear market, rising inflation and a hawkish Fed, show signs of abatement.

Stocks are on track to post gains for July as Explorer recommendations have a good week with new pick Centrus Energy (LEU) up 20% followed by Cloudflare (NET), up 15%. Now, we head to Germany for today’s pick.

Cabot’s Mike Cintolo of Cabot Growth Investor and Crista Huff of Cabot Undervalued Stocks Advisor were featured in Forbes for their 2017 stock picks, and names their top picks for 2018.