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One tool that we’ve long used is, after a big move (either up or down), if the market starts to get very volatile, it’s often a sign that the buyers and sellers are fighting it out—and could lead to a character change. That said, we’re mentioning that more as a heads up than as any major red flag—at day’s end, the trends of the major indexes and most leading stocks are up, and it’s possible that Nvidia’s (NVDA) quarterly report cleared the air last week. All told, we’re bullish but we also think the odds favor more tricky trading going ahead. We’ll leave our Market Monitor at a level 7 while keeping a close eye on the post-NVDA action.

This week’s list has some tech leaders, but it also has more than a few names outside of the AI field, both smaller and larger. For our Top Pick, we’re going with a liquid leader where we think investor perception has a lot farther to run on the upside.

The market has been a little iffy over the last five or so sessions. This action, coming on the back of great earnings from mega cap tech stocks last week, but not great reactions, suggests a more conservative stance is appropriate right now for some of our high-growth names.

We’ve written about inflation in the past two letters and promise that we’ll stop with this letter, unless some major news on this front emerges. Yet, what keeps us on the topic is commentary from brokerage firms and media outlets saying that the market is fully discounting the arrival of inflation. If inflation is here to stay, at perhaps a rate greater than, say, 3-4%, then the market is not discounting its arrival.

Current Market Outlook


Following the Brexit reaction, all of the major indexes are now decisively below their respective 50-day lines. Thus, we consider the intermediate-term trend to be down, which means it’s best to pare back. (We’ve knocked our Market Monitor down two notches this week.) It’s fine to hold your resilient, profitable performers (there are many stocks and sectors taking this selloff in stride), but you should honor all stops and loss limits and limit new buying to just small positions in strong stocks. The net result will be a higher cash position (around 50%, give or take, depending on what stocks you own and how you run your portfolio) and a handful of top performers in your portfolio. The next few days will be important—a quick snapback would be encouraging, but continued deterioration would have us advising an even more defensive posture. We’ll be watching.

This week’s list is a combination of defensive stocks, yield stocks, some precious metals and a couple of resilient growth ideas. Our Top Pick is Dollar Tree (DLTR), a defensive-type stock that should show excellent earnings growth thanks to last year’s game-changing buyout of Family Dollar.

Stock Name	Price	Buy Range	Loss Limit
Veeva Systems (VEEV)	180.23	32-34	29.5-30
Silver Wheaton (SLW)	0.00	20.5-21.5	19-19.5
SiteOne Landscape Supply (SITE)	98.49	31.5-33	28-28.5
Royal Gold, Inc. (RGLD)	129.66	67-69	61-63
Jack in the Box (JACK)	0.00	82-84.5	77-78
Gigamon (GIMO)	0.00	33-35	30-31
Dollar Tree (DLTR)	0.00	89-92	84-85
Communication Sales & Leasing (CSAL)	0.00	26-27.5	24-24.5
Boardwalk Pipeline Partners (BWP)	0.00	16.5-17.5	15.5-16
Align Technology (ALGN)	316.20	75.5-77.5	72-73

Our Market Monitor has been in the bullish zone since mid-August, and it remains there today—the intermediate-term trends of all major indexes and the vast majority of leading stocks are still bullish. That said, in the short-term, the market remains choppy; distribution was clearly seen last week, and with earnings season beginning in a couple of weeks, it makes sense that investors will hold their cards close to their vests. Thus, while we wouldn’t push the accelerator to the floor, our overall advice isn’t much changed: Hold your best performers, consider taking partial profits in some extended stocks and look to use normal weakness as a chance to buy.

Encouragingly, this week’s list has a surprising number of solid-looking set-ups and names that have actually come to life in recent days. Our favorite of the week is CF Industries (CF), the huge fertilizer maker that is trading well and has huge earnings power in this era of high crop prices.

Stock Name	Price	Buy Range	Loss Limit
CF Industries (CF)	45.23	215-225	-
CommVault (CVLT)	0.00	55-58	-
Expedia Group (EXPE)	0.00	55.5-57.5	-
Five Below (FIVE)	134.58	36-38	-
Gilead Sciences (GILD)	75.10	64-66	-
Marathon Petroleum Corporation (MPC)	0.00	52-54	-
Packaging Corp (PKG)	0.00	34-36	-
Regeneron Pharmaceuticals (REGN)	512.96	146-150	-
Splunk (SPLK)	207.67	33-35	-
Williams-Sonoma (WSM)	64.96	42-44	-

In today’s note, we discuss the recent earnings reports from Bayer AG (BAYRY), Duluth Holdings (DLTH) and LB Foster (FSTR).

Emerging markets ETFs, the strategy that doesn’t really deliver results. I’m going to make a blunt statement.

In November’s Issue of Cabot Early Opportunities we discuss the supposed rotation from growth stocks into value stocks and the underlying reasons, which we think could drive erratic market action in the coming weeks. Despite the somewhat conflicting trends out there, we serve up a menu of compelling opportunities spanning Medtech, manufacturing, software and even health and beauty products, which we can all use a little of these days!

Over the past month or so, it seemed like stocks would continue their frenetic surge. This week, however, the market appears relatively lackluster with a lot less excitement. Some investors may yearn for more fireworks, but as a value investor, I find this calm to be more sane.

I’m not going to sugar coat it: We are in a dodging rain drops type of market as every day a handful of stocks break down, and then continue to fall apart in the days that follow.

The same culprits continue to plague the market: historically heightened levels of inflation, upcoming Fed rate hikes, and escalating geopolitical tensions between Russia and Ukraine, with growth sectors taking the brunt of the pain. Last week the Dow lost 1.9%, the S&P 500 fell 1.6% and the tech-heavy Nasdaq dropped 1.8%. Year-to-date the Dow, S&P 500 and Nasdaq are lower by 6.2%, 8.8% and 13.4%, respectively.



Until we see some clarity in the areas of concern, the market could be in for some more rocky days/weeks like we have experienced since November, and that’s OK and normal.

Options trading is the only way to protect yourself in case Donald Trump comes after one of your stocks on Twitter - like he did with these three stocks.

Despite the uncertainty in the market, there has been a glut of IPOs this year. Some recent IPOs could lead the next bull charge. These two in particular.

Last Tuesday the market sold off big-time. Today it recovered equally big. But many stocks haven’t bounced as much as they fell, and some of them are in our portfolio. That’s the general reason for my four sell recommendations today.

Still, while there are growing divergences, the bull market is not dead yet, and today’s recommendation is a mass-market retail name whose stock looks great as investors look forward to more expansion.

In preparation for today’s Cabot Wealth Advisory, I went back and read our in-house recap of a recent survey we sent you. While it was expressed a few different ways, the most common response was some form of “Help me make money by helping me know when to buy, sell, be in and out of the market ... " and so on. Today I want to give you 10 nuggets to put in your investing toolkit.

Current Market Outlook


The divergence continues, with the broad market looking increasingly weak. Even the rally last week couldn’t lift many stocks off their bottoms. So what comes next? Optimists may claim that low interest rates mean there are no attractive alternatives to stocks, but pessimists will note that divergences such as these seldom end well. Thus our market monitor remains unchanged—in slightly positive territory. You can still make money in this market, but more than ever, skillful stock-picking, combined with proper entry timing, is critical. So we urge you to study numerous individual stocks carefully. Try to buy on normal pullbacks. And above all, keep losses small if a stock doesn’t do what you hired it to do. Today’s roster includes some strong breakouts and a handful of set-ups, and our Editor’s Choice is Vantiv (VNTV), which vaulted out to new highs last week on a positive earnings report and is riding a fine trend of long-term growth.

Stock Name	Price	Buy Range	Loss Limit
Zoës Kitchen (ZOES)	0.00	43-45	39-39.5
WisdomTree (WETF)	0.00	24-26	21-22
Vertex Pharmaceuticals (VRTX)	230.36	135-137	121-123
Vantiv (VNTV)	0.00	42-45	39-40
ServiceNow (NOW)	341.86	76-78	72-73
Masco (MAS)	0.00	24.5-26	23-24
ICON plc (ICLR)	0.00	78-80.5	71-72
Equinix, Inc. (EQIX)	547.73	270-280	260-265
Buffalo Wild Wings (BWLD)	0.00	188-193	174-176
Anacor Pharmaceuticals (ANAC)	0.00	144-151	125-130

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Current Market Outlook


Once again, the major indexes tested new high ground last week, and once again, the sellers appeared and drove the indexes and many stocks lower. Day-to-day fluctuations aside, the story remains the same—the intermediate-term trend remains sideways, though below the surface, there are many stocks and sectors making good-sized multi-week moves. So the goal, of course, is to stick with what’s working (though taking partial profits on the way up makes sense) while jettisoning any stocks that break support. Keeping some cash on the sideline is also wise, at least until the market begins a sustained uptrend.

This week’s list has it all—some speculative stocks, some stocks that have pushed ahead on big news and some turnaround situations. Our Top Pick is Ligand Pharmaceuticals (LGND), partly because of the big story, and partly because of the lower-risk set-up in its chart.

Stock Name	Price	Buy Range	Loss Limit
T-Mobile US (TMUS)	0.00	36-38	33.5-34.5
NetEase, Inc. (NTES)	0.00	138-143	127-128
MercadoLibre, Inc. (MELI)	980.83	140-145	130-133
Louisiana-Pacific (LPX)	0.00	17.5-18.5	16-16.5
Ligand Pharmaceuticals (LGND)	267.14	83.5-87	79-80
Integrated Device Technology (IDTI)	0.00	23-24	21-22
Dunkin’ Brands Group, Inc. (DNKN)	0.00	52-53	49-50
Clovis Oncology (CLVS)	0.00	84.5-87.5	77-78
Ciena (CIEN)	44.25	23-24	20.5-21
Broadcom Limited (AVGO)	266.26	143-148	128-130

Current Market Outlook


The market has been shaking and baking during the past three weeks on lots of headline (mainly currency-related) news, but while there has been some damage, the major indexes are holding key support and relatively few stocks have fallen apart. Of course the evidence can change at any time, and if the market really breaks down, we’ll turn cautious. But, despite the whippy day-to-day action, we’re sticking to our bullish stance, and believe holding your best performers, and even doing a little buying at opportune times, will prove fruitful.

This week’s list is once again heavy on the medical and retail sectors, though there are a few other tempting ideas out there, too. Our Top Pick is Urban Outfitters (URBN), which has come back to life after a long period out of the limelight.

Stock Name	Price	Buy Range	Loss Limit
WisdomTree (WETF)	0.00	20-21	18-19
Vulcan Materials Company (VMC)	137.10	80-83	75.5-76
United Therapeutics (UTHR)	0.00	164-168	158-160
Urban Outfitters (URBN)	0.00	43.5-45	38-39
SunEdison (SUNE)	0.00	22.5-24	20.5-21
IPG Photonics (IPGP)	0.00	96-99	87-89
Horizon Therapeutics (HZNP)	49.89	21-23	19-19.5
GrubHub (GRUB)	140.03	42-44	39-39.5
Foot Locker (FL)	0.00	59-62	56.5-57
American Eagle (AEO)	0.00	16.5-17.5	15-15.5

Current Market Outlook


Despite the never-ending Fed watch (many investors are looking forward to this week’s jobs report for clues on the Fed’s next move), the major indexes remain in a very tight trading range, with some (including the S&P 500) basically unchanged since mid-July. Still, by our measures, the intermediate- and longer-term trends remain up, and the fact there has been little giveback by the major indexes in recent weeks is a positive. Individual stocks have been trickier, with some potholes emerging on earnings, rotation among industry groups or simply profit taking, but most remain in good shape. Overall, the odds continue to favor the next big move being up, so you should stay heavily invested in strong stocks.

This week’s list has a nice mix of stories to consider, including a couple that are benefiting from recent acquisitions. But our Top Pick is NetEase (NTES), a leading online game company out of China—growth is excellent, and after a brief shakeout, the stock is back in new high ground.

Stock Name	Price	Buy Range	Loss Limit
ZELTIQ Aesthetics Inc (ZLTQ)	0.00	35-37	32-33
Cimarex Energy (XEC)	0.00	129-134	122-124
Thor Industries (THO)	104.76	78.5-79.5	73-74
Proofpoint (PFPT)	113.79	75-77.5	70-71.5
NetEase, Inc. (NTES)	0.00	208-214	195-196
NetApp (NTAP)	0.00	33.5-35	31-32
Microchip Technology (MCHP)	79.12	59-60.5	55.5-56
Lumentum (LITE)	87.00	32-33.5	29-30
Dexcom (DXCM)	421.36	89-91.5	82-83
Berry Global (BERY)	64.22	43-44	39-40