Maneuvering Choppy Markets

Stock Market Video

February and Choppy Markets 

This Week’s Cookie

In Case You Missed It

In this week’s video, Mike Cintolo discusses his cautious overall market outlook, as the major indexes haven’t been able to break free of their sideways-to-down trend in recent weeks. However, for the first time in months, Mike is spotting some subtle bullish action among growth-oriented stocks, sectors and indexes—and that’s why he’s got his shopping list ready and believes the next couple of weeks will tell us whether new growth stock leadership will emerge. Click below to watch the video.

February and Choppy Markets 

Joseph Wood Krutch, the critic and naturalist who died in 1970, used to say that, “The most serious charge which can be brought against New England is not Puritanism but February.”

It’s a good line, and one that has special meaning for us at Cabot as we tidy up after a major snowstorm and await the next one as the calendar turns to February. (It’s also why the saying gets attributed to so many other people. After all, a good line has more oomph if you credit it to someone with higher name recognition like H.L. Mencken or Mark Twain.)

As I understand it, what Krutch had in mind was that snow in January, coming after a month-long holiday season, can seem kind of refreshing. All that snow! Sledding, skiing, sun glinting off the trees and snowmen smiling in front yards.

But once February arrives, the thrill has lost its edge, and those of us who live in northern New England realize that we still have a minimum of two months of snow, wind, slush, road salt and black ice before we can even start looking for snowdrops peeping through the drifts, much less the crocuses that really lift the spirit.

It’s too bad there are no seasonal calendar markings for stock markets. Emerging market stocks, as a group, are sitting today right about where they were in October 2013, which is well over 15 months! Yes, there have been two strong rallies (and two modest ones) in the interim, but the net result for the entire class is just zero.

So when is spring coming to the market? Who knows?
Most of us thought it was spring when the S&P 500 Index came roaring out of its September–October correction in a stunning V-shaped recovery and sprinted to a couple of new highs in December. But the four downward runs that have kept the S&P (mostly) between 2,000 and 2,080 since early December have had a definite chilling effect on growth investors.

Earnings season has provided a few rays of sunlight, with Apple (AAPL) and Amazon (AMZN) delivering huge profits that kicked their stocks into high gear. Big wins from big companies can give the major indexes a nice shot of energy.

If you’re an index investor, you have to focus on the Big Picture. You’ve cast your lot with the standard wisdom that says you can’t outperform The Market. This strategy follows the long-term trend of the market, which has historically been up. Never mind the bubbles and the periods of stagnation and choppiness. If you just trust that time will eventually push your index higher, you will reach your goal.

It’s not my way, nor the way of active investors everywhere. I prefer not to put my assets into the hands of a strategy that keeps driving on the same highway even when there’s a traffic jam or a bridge out.

Becoming an active investor won’t help spring come any faster. But it will put you in a position to really enjoy it when the market comes out of its current muddle and gets moving again. And you will have a chance to find out what it’s like to own the strong stocks that are moving the indexes, not the whole truckload.

If you’d like to find out how this works, you can visit the Cabot website and browse through the active advisories we offer to investors who want to do their own driving.

New England, and the markets, will get through February as we always do: patience, keeping busy, reading, working, finding the sunny spots when the sun shines and shoveling the white stuff when it doesn’t. And investors everywhere who follow the Cabot disciplines will stay in step with the market, dealing with the reality that comes over the horizon at us. It’s a good way to go about things.

Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.

Tim’s Comment: Yet it is impossible, as an investor, to be in possession of all the facts about any single stock, much less the entire market. Happily, the market is a perfect digester of all the facts (and opinions) relevant to each stock and in its actions, shows us the truth. All we need to do is notice it, accept it, and act on it.

Paul’s Comment: This quotation could be invoked about all kinds of controversial topics, but I’m not going to do that. Rather, I’ll just point out that investors in all kinds of assets can make excuses for why their choices aren’t working out. Maybe they blame the shortsightedness of other investors or government interference or just bad luck. That’s why, when managing my own stocks, I prefer to use a stock’s chart rather than news sources. The chart always tells the truth and it misses absolutely nothing. The chart is the biggest fact there is; learn to use it and you will give yourself a huge edge.

In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.

Cabot Wealth Advisory 1/26/15 – Stocks vs. Municipal Bonds

Cabot Stock of the Month’s Chief Analyst Tim Lutts writes about why he pays taxes, but doesn’t favor tax-free muni bonds. He also gives the seventh in his series of Revolutionary Stocks. Stock discussed: Solar City (SCTY).

Cabot Wealth Advisory 1/27/15 – How the Weather is Like the Stock Market

In this issue, I talk about how big blizzard predictions are often like big bear market predictions; you’re better off knowing what to do no matter what happens. Stock discussed: HDFC Bank (HDB).

Cabot Wealth Advisory 1/29/15 – The Stock That’s Leading the LED Revolution

Mike Cintolo, the brains behind Cabot Market Letter and Cabot Top Ten Trader, writes about how this market is intriguing despite its choppiness and how to handle volatility in your stocks. Stock discussed: Acuity Brands (AYI).

Have a great weekend,

Paul Goodwin
Chief Analyst of Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory

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