CBS Market Watch Quotes Cabot Market Letter’s Market Outlook

Reprinted from MarketWatch:

Winter of bull’s discontent nears an end
Key newsletters optimistic about spring prospects


By Peter Brimelow, MarketWatch, February 4, 2008

NEW YORK (MarketWatch)—Bulls, bears and … groundhogs? Key letters have stuck out their snouts and think the stock market winter may be nearly over.

First, a proprietary word. The Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average recommended stock market exposure among a subset of short-term market timing newsletters tracked by the Hulbert Financial Digest stood at +11.8% of Friday night, up modestly from the levels earlier in the week.

Mark Hulbert continues to regard this as a mild concern, because HNSI did not reflect the depths of despair usually seen at market bottoms. But it certainly isn’t excessively bullish. See Jan. 31 Hulbert column.

Next, a word from 2007’s top-performing service by Hulbert Financial Digest count: the Cabot Market Letter.

Cabot is generally bullish, but it broke with its fellow-bulls to go sharply negative on stocks in November. And in January it declined to be tempted back in. See Jan. 10 column.

In its latest issue, dated Jan. 31, Cabot says its Model Portfolio is still 63% in cash. But it adds: “There is a bright spot, and it comes from the readings of investor sentiment. Sentiment has become so dour that it suggests the market has reached a bottom….Still, we can’t turn bullish until we see our trend-following indicators turn up, and right now it’s just not happening. Instead, the market is working on building a bottom, which means individual stocks are still occasionally taken out and shot … like VMware Inc. (VMW)

Cabot went on: “We expect to see more of this in the weeks ahead, as fourth quarter earnings results are released. But eventually, if all goes well, the selling pressures will ease and the buyers will once again take control, sending leading stocks soaring and bringing big profits…”
Currently the only “buy” in Cabot’s Model Portfolio: Agnico-Eagle Mines Ltd. (AEM).

Cabot issues an interesting warning: “Many investors are still holding on to Research In Motion Ltd. (RIMM), Apple (AAPL) and Baidu (BIDU) despite their poor action. We think that’s a big mistake! Remember that no matter how great a stock has been or how great the company, every stock eventually tops out. And with our trend-following indicators decisively in the bearish camp, the odds favor these stocks having already hit their zenith … Even if they do head up, you probably won’t want to buy them back. Why? Because there will be new leaders in the next advance, stocks that are just getting off their launching pads.”

Two stocks Cabot is auditioning for this role: Cepheid (CPHD) and Chipolte Mexican Grill (CMG).
 
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