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Today, the widespread, ongoing move to the cloud by businesses of all sizes means there are all sorts of customized apps and differentiated hardware that don’t always work together the way they’re supposed to.

Current Market Outlook


The rapid spread of China’s coronavirus provided the impetus for a selloff that began last Friday and exploded onto the scene today. Where does that leave us? First, the intermediate-term trend of the indexes is still positive but close to the fence; the big-cap indexes look OK, but the broader measures (small and mid caps) are right around their key 50-day lines. Beyond the charts, it’s likely that more time is needed for investors to trim/hedge after four months of straight-up action. As for leading stocks, we’re taking it on a case-by-case basis—some are looking ragged and ripe for a deeper correction, but most are pulling back normally. If you’re heavily invested, our advice is to follow the usual plan: Hold most of your shares in your strong, profitable stocks, while selling or keeping tight leashes on losers and laggards. We’re moving our Market Monitor down to a level 6.

On the buy side, newer names that are holding up well should be near the top of your shopping list. This week features plenty of those, with our Top Pick being Kansas City Southern (KSU), a reliable grower that just reacted well to earnings.

Stock Name	Price	Buy Range	Loss Limit
Agios Pharmaceuticals, Inc. (AGIO)	52.43	50.5-52.5	45.5-47
Bristol-Myers (BMY)	66.24	62-64	59-60.5
Datadog (DDOG)	81.52	39.5-41.5	36.5-38
Kansas City Southern (KSU)	176.54	162-165	150-152
Sea Limited (SE)	132.86	42.5-44.5	38-39
Snap Inc. (SNAP)	16.68	18-19	16-16.5
STMicroelectronics (STM)	30.09	27.5-28.5	25-25.5
Taiwan Semiconductor (TSM)	78.41	57-58.5	53-54
Wix.com (WIX)	302.53	137.5-141	127.5-129
Zillow (Z)	76.64	46-48	42.5-44

The long-awaited pullback appears to have arrived, with fears and uncertainty surrounding the coronavirus and its impact on economic growth bringing out the sellers; our Cabot Tides, in fact, are now on the fence. In the near-term, the odds favor some more pain being dished out, not necessarily because of the virus, but as the market consolidates its strong four-month advance. Big picture, though, this is still a bull market, so while we’ve trimmed a bit, we’re aiming to hold our strong, profitable stocks, thinking higher highs are likely once this pullback does its work.

In the Model Portfolio, we took partial profits on DocuSign and ProShares S&P 500 Fund earlier this week, which lifted our cash position to around 20%. And from here, we’ll just take it as it comes, as we explain in tonight’s issue.

Current Market Outlook


The market rebounded nicely today, and we won’t pooh-pooh that, as a show of support is always a positive. That said, we need to see more to conclude the sellers have left the building—the intermediate-term trend, for instance, remains on the fence, and while there are no sure things, it’s likely the market will need more than six days to consolidate a four-month advance. Bigger picture, nothing has changed our view that this is a bull market, though, so we’re certainly not advising you to become overly defensive, but we’d stick with the plan of holding some cash, keeping your weakest stock or two on a tight leash and being careful on the buy side, especially when it comes to buying on strength (most moves to new highs are being met with selling). Our Market Monitor will remain at 6 for now, though we’re obviously watching things closely.

Believe it or not, many stocks did well last week, and today’s list features some of them. Our Top Pick is Yeti (YETI), which is set up nicely ahead of earnings in two weeks; you could nibble here, or just wait until you see a powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	182.16	143-147	133-135
Dynatrace (DT)	36.59	28-30	25-26
Fortune Brands Home & Security (FBHS)	81.02	67.5-69.5	63-64
Franco-Nevada (FNV)	125.51	108-111	100-101.5
Momenta Pharma (MNTA)	31.63	27.5-30	23.5-25
Penn National Gaming (PENN)	45.38	28-30	25-26
PulteGroup (PHM)	45.93	43.5-45	40-41
ServiceNow (NOW)	341.86	328-336	303-306
Tandem Diabetes (TNDM)	74.77	73-76	65-67
Yeti Holdings (YETI)	42.80	35.5-37.5	32.5-33.5

In the field of speech recognition software, this stock is a pioneer with plenty of room to grow. The company is known for its Dragon Naturally Speaking software package, which makes dictation faster and nearly as accurate as typing. It also allows users to control computer programs and send emails by voice command.

Today’s recommendation is a British outfit that, as its stock symbol suggests, is thriving thanks to offerings that help workplace teams plan, interact, engage, track progress and more, all of which is becoming more difficult as workplaces become more mobile.

STMicroelectronics is one of the world’s largest semiconductor companies, delivering solutions that are key to the smartphone and automotive markets. Major customers include Apple and Tesla, though the firm (which is based in Switzerland) sports more than 100,000 customers around the globe.

Global investment bank Morgan Stanley thrilled investors last week by delivering record profit and revenue numbers, beating Wall Street’s fourth quarter 2019 revenue and earnings estimates, and meeting or exceeding all of CEO Jim Gorman’s performance targets.

It’s been a mixed week with lots of volatility, though most indexes are down a bit since Monday. As we write this, the S&P 500 is down about 0.8% for the week, while the Nasdaq is up 0.6%.

The market had a solid setup a few weeks ago, with the major indexes successfully retesting their February lows and many positive divergences showing up in the broad market. We’re not going to predict what comes next, but with the rally starting to fail, we’re going to raise a little more cash by selling one position.

One of our stocks reported this morning and results came in just shy of expectations. The bottom line is that the stock is selling off hard and is back down to its 200-day line, and in the zone of support that’s held for the last four months.

One of the stocks in our portfolio is involved in a merger. I virtually always advise investors to sell upon receiving buyout offers. However, I admit that owning a debt-free oilfield service company in today’s stock market is enticing. I’ll make my recommendation within a few days.