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We’ll let everyone else fight it out over the meaning and truthfulness of the DeepSeek revelations—as always, we’ll stay focused on the actual evidence, and here’s what we see: First off, the broad AI infrastructure areas look very iffy; the odds favor most chips, networking and electricity stocks are in the so-called penalty box. That said, the rest of the market took on water today but didn’t look abnormal. We do view the dramatic action as a yellow flag but we’re also not panicking as many of the names that had begun to perk up/break out are still acting well enough. We think it’s prudent to drop our Market Monitor back to a level 6 and take things on a stock-by-stock basis from here.

This week’s list does have a couple of AI-related names that got whacked, but the rest are from other areas that look fine. Our Top Pick is a name that looks like it’s finally, decisively changed character. Start small and aim for dips.

It was another positive week for the market, with some major indexes nosing to new highs, and while it’s far from 1999 out there, individual stocks are seeing very few breakdowns while the leadership ranks gradually expand. Of course, there remain some headwinds out there, but the intermediate-term evidence remains positive, and we’re now even seeing some longer-term evidence start to point up. Thus, we’ll nudge our Market Monitor up another notch to a level 8.

This week’s list has something for everyone, with some zingers, some steady Eddies and more than a few recent earnings winners. Our Top Pick looks like an emerging blue chip in the cloud software field, and shares emerged from a big consolidation after earnings last week.

Current Market Outlook


For many weeks, we’ve been writing that there’s more good than bad in the market, and indeed, while choppy, many names did work their way jadedly higher. But now the shoe is on the other foot: The intermediate-term trend is now down for the major indexes, and we’re starting to see more and more individual stocks follow suit. It’s not a complete disaster, and given the on-again, off-again environment of 2021, we’re not ruling anything out, including a turn back up in the days or weeks ahead. (Even now, we’re fine sticking with your strong, profitable stocks.) But after a couple of rounds of sharp distribution and some breakdowns among leading stocks, we think it’s simplest to say the onus is on the bulls—we need to see at least a few days of constructive action and some upside power in the indexes and individual stocks to conclude the sellers are losing control. We’re leaving our Market Monitor at a level 5 and, until proven otherwise, would play things cautiously with only small new positions, trailing stops and a decent chunk of cash.

This week’s list has an interesting crop of stocks, ranging from commodity to reopening to legitimate growth outfits. Our Top Pick is CF Industries (CF), which is emerging from a multi-month dead period with a lot of power; as with most names in this market, try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Affirm Holdings (AFRM)	108	105-111	89-92
SKIN (SKIN)	26	24.5-25.5	21.5-22
Caesars Entertainment Corp. (CZR)	118	113-117	102-104
CF Industries (CF)	61	58-61	51-53
ConocoPhillips (COP)	71	67-70	61-62.5
International Game Technology (IGT)	28	26-28	22.5-23.5
Live Nation Entertainment, Inc. (LYV)	98	95.5-98.5	87-88.5
Matador Resources Company (MTDR)	40	37-39	32.5-34
Palo Alto Networks (PANW)	470	457-472	417-427
Paycom Software (PAYC)	495	480-495	440-450

It looked like the bulls were ready to put up a fight last Wednesday, but it’s been all down since then, lowlighted by today’s action. Stepping back, we have two thoughts: Short term, there was definitely some panic today, and the fact that we saw a solid intraday bounce (closed well off the lows) implies some sort of bounce is possible. That said, the sharp, straight-down action from the market peak less than four weeks ago tells us a good amount of repair work is needed even if we do bounce. In terms of actions, we haven’t been pushing the envelope for many weeks, so if you have a good-sized cash position, we wouldn’t necessarily sell wholesale. That said, you should honor most stops (simply holding everything and hoping isn’t advised) while remaining patient. We’ll drop our Market Monitor to a level 4 (from 6) given the damage.

This week’s list has a lot of proper charts even after the latest selling storm. For our Top Pick, we’re going with a well-situated biotech firm that popped on positive drug trial results that will dramatically expand the opportunity for the big-selling drugs already on the market.

The stock market correction came and went rapidly in recent weeks! Granted, stocks are not done bouncing around yet, and a few sectors are lagging the broader market, including energy and healthcare.

The best dividend stocks for 2017 come from three distinct industries that should benefit greatly from President Trump’s policies.

As we move into the third quarter, analysts at Goldman Sachs write that their baseline forecast is for the S&P 500 to gain 5% in the second half of the year. In their “vaccine upside” scenario, stocks rise by 14% from here; in the “virus downside” scenario, they drop 30%.

This week has brought several news items on the Green front, including a speech by President Barack Obama where he said, “We’re on the cusp of this new energy future.” Find out how you can take advantage of it ...

Everyone likes a stock with a good story. And there’s no story more inspiring than the turnaround story: failure (or at least some trouble) is followed by rock bottom, and then redemption. Of course, as an investor, you have to get in at some point before redemption. With that in...

In today’s note, we discuss the recent developments concerning Barrick Gold (GOLD) and V.F. Corp. (VFC), while taking a nice profit in the latter stock.

Short-term, the market remains under pressure, notwithstanding today’s strength, so certain defensive measures remain appropriate. But long-term, the market’s main trend remains up, so I don’t recommend any wholesale changes, just minor fine-tuning.

Today, that involves upgrading one strong stock to buy, while selling two stocks that have weakened in face of growing fears of tariffs on China.

As for today’s new recommendation, it’s a high-risk stock with great long-term potential—if we can just get on board at the right time! Details in the issue.

It was a great first quarter. The S&P closed out March up 10% YTD. The index also rallied an impressive 28% from late October through the first quarter. Is there more upside ahead?

Things have been good. The Fed reiterated its intention to lower the Fed Funds rate three times this year at the March meeting. Meanwhile, inflation is way down and the economy is solid. Manufacturing data was much better than expected and the Fed raised its GDP forecast for 2024 from 1.4% to 2.4%.

The market has shifted into a news-driven environment; today the indexes popped higher as it appears any strike on Syria will be delayed, or possibly abandoned. But with many economic reports coming up that could affect interest rates (including the jobs report on Friday) and with Congress debating Syria, expect more gyrations ahead. Overall, our outlook is the same as the past two weeks—with many growth stocks acting well, you should hold your top performers and look to do a little buying on weakness. But with the indexes chopping around, you should also hold some cash and wait for a real green light before getting too aggressive.

This week’s list includes a few secondary-type names; there aren’t as many liquid leaders as has been the case in past weeks. But there are plenty with big potential. Our favorite is Hain Celestial (HAIN), a direct play on the organic food movement, whose stock just emerged from a year-long rest.

Stock Name	Price	Buy Range	Loss Limit
Zillow (Z)	76.64	92-97	78-80
Web.com (WWWW)	0.00	27-28.5	25-25.5
Sina Corp. (SINA)	0.00	76-80	68-69
Nationstar Mortgage (NSM)	0.00	48-51	45-46
Laredo Petroleum (LPI)	0.00	24-25.5	22.5-23
Jazz Pharmaceuticals (JAZZ)	0.00	85-87	79-80
Incyte Corporation (INCY)	76.98	33-34.5	29-30
HD Supply Holdings, Inc. (HDS)	0.00	22-23.5	20.5-21
The Hain Celestial Group, Inc. (HAIN)	0.00	78-80.5	73-74
Chesapeake Energy Corporation (CHK)	0.00	25-26	23.5-24

The title of today’s issue is “Don’t Overreact”—the major trend of the market is still up, and there are many signs pointing to higher prices in the months ahead. Chloe adds a new stock to the Safe Income Tier and presents her view on the forces affecting interest rates and income investments today.

A coming reorganization in sector classification will trigger a major shakeup in sector funds. That means short-term market volatility - and opportunity.

The market’s traditional “spooky season” is here, and stocks are dutifully selling off as they normally do the first week of September. The selling could last a few days or a few weeks. But on the other side of it, there will be big buying opportunities. Until then, let’s try and limit the damage, which we do in today’s issue by selling off one underperformer that’s taken a beating after an underwhelming earnings report and buying a deep value consumer staple that’s too oversold. It’s a stock Clif Droke recommended to his Cabot Turnaround Letter audience last week, and we follow suit here today.

Details inside.

We briefly discuss our thoughts on valuation and raise our price target on shares of a consumer staples company and introduce a new Buy rating on a retail company.