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Evidence Remains Mostly Bullish

February 18, 2020

The market environment remains the same, with the primary evidence (trends of the indexes and leading stocks) firmly up, though many names are extended, which opens the door to some potholes and news-driven selloffs (like the virus news this morning). You should continue to hold most of your strong, profitable stocks, but we still favor picking your spots on the buy side, looking for names that are earlier in their intermediate-term advances and have shown some great buying power of late.

Encouragingly, this week’s list has more than a few stocks that have those characteristics, with our Top Pick looking like a fresh leader with a big growth story.

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Still Bullish, but Expecting Further Volatility

February 10, 2020

There’s nothing bad to say about the market’s quick rebound—at the very least, such action from the big-cap indexes and many leading stocks is a good sign there remain buyers underneath the market. But it’s also important to look at all of the evidence, and on that front, things are more mixed. That describes an environment that’s a bit hit-and-miss, especially with a ton of earnings reports set to be released. Overall, you should remain bullish, but be a bit discerning on the buy side, looking for names that have shown excellent recent strength and volume.

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Solid Bounce, but Probably Not Out of the Woods

February 3, 2020

The market rebounded nicely today, and we won’t pooh-pooh that—the show of support is always a positive. That said, we need to see much more than that 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 likely to head over time, 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.

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The Sellers Strike Back

January 27, 2020

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 now on the fence; the big-cap indexes look OK, but the broader measures (small and mid caps) are right around their key 50-day lines. And, 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, though most are handling themselves in fine fashion so far. 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.

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January 20, 2020

The market remains extremely strong, as the combination of a new year and reduced anxiety about China trade has encouraged the bulls and calmed the bears. At the same time, a broad correction is increasingly overdue, as numerous stocks have grown increasingly stretched far above their moving averages. Thus, when you do buy, you need to do so with an eye not just to the potential upside but the potential downside as well.

The ideal buy for many of today’s stocks might be on a brief pullback that finds support. Stocks in this issue range from global giants like Morgan Stanley and Match to smaller, faster-growing technology companies like touch-screen expert Synaptics and chipmaker-for-Apple Cirrus Logic.

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Powerful and Persistent—and More Selective

January 13, 2020

The big-cap indexes remain in rarified air, as they continue to levitate higher and the sellers refuse to put up a fight. Even more encouraging is that many stocks that took the prior few weeks off (generally building tight ranges) have resumed their advances, a good sign. This week’s list includes a bunch of names that have shown excellent strength after resting for a few weeks—or in some cases, months.

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Reasonable Retreat (So Far)

January 6, 2020

Usually when the market is stretched and sentiment is complacent, the market latches onto a reason to retreat, and last week provided it, with the Middle East conflict offering an excuse for sellers to get active and buyers to pull in. The good news is, thus far, the retreat has been reasonable—the major indexes are still even above their 25-day lines, while few stocks have cracked any key support or flashed any abnormal action, all of which is a plus. That said, we’re leaning toward the view that, Iran or not, the short-term is likely to remain tricky, with rotation, potholes and news-driven moves likely to be the norm for a while. Thus, we remain bullish, but continue to advise picking your spots in the near-term—many stocks have etched nice month-long rest periods, though some others probably need time to consolidate.

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Same Story: Strong Bull Market with Short-Term Risks

December 30, 2019

As the year winds to a close, nothing has changed with the market’s overall stance—big picture, it’s a bull market, and numerous factors tell us that the uptrend has farther to go; the odds favor higher prices looking months down the road. Our last list of 2019 is a broad mix of strong stocks, including turnarounds, recent breakouts and fresh setups.

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A Bit Divergent, but Still Bullish

December 16, 2019

As we steamroll toward the end of the decade, the overall market remains in good shape—the intermediate-term trend is firmly up and many longer-term studies tell us that 2020 is likely to be another solid year. That said it’s not all peaches and cream out there, as we’re seeing a bit of divergent action among individual stocks. None of that is “bad,” per se, but it is a reminder to honor and update your stops as time goes by, and to take a couple of partial profits if you score a decent profit.

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Bullish, though More Wobbles Likely

December 9, 2019

The market hit a little turbulence early last week on renewed trade worries but bounced back nicely by Friday. Short-term, though, we wouldn’t be surprised to see some further ups and downs as the market and many stocks/sectors consolidate their two-month runs. The good news is that we continue to think current pullbacks and consolidations are (and will continue to) lead to some good entry points in a variety of leading stocks. All in all, we remain bullish.

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Lockout Rally Thus Far

November 25, 2019

The market finally hesitated a bit last week, and going through our weekend research, we did spot more leading names that had pulled back during the past five to 10 trading days. But as has been the case since the early-October lows, that weakness was tame, with today’s burst of buying pushing many back up. There’s still some shorter-term yellow flags, so we wouldn’t throw caution to the wind here (don’t forget to take some partial profits!), especially if you’ve put a bunch of money to work in recent weeks. But the fact that most stocks and indexes haven’t been able to retreat much despite those yellow flags is yet another stone in the bullish wall. We remain bullish.

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Minor Worries, but Main Evidence Remains Bullish

November 18, 2019

When we did our research over the weekend, we really liked what we saw: Not only are the intermediate- and longer-term trends up for all the major indexes, we see a ton of recent breakouts acting well across a variety of industries. That said, there are some minor worries to keep in mind—short-term sentiment measures are very complacent, and many leaders are also extended for the time being, meaning a rest/shakeout is a growing possibility. We think any pullback will offer up a bunch of solid entries, but in the meantime, it’s best to be a bit choosy on the buy side.

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To Pullback or Not to Pullback

November 11, 2019

The major indexes have now rallied five weeks in a row, which has created a few short-term yellow flags among overbought and sentiment measures; similar readings during the past few months have preceded multi-week, tedious retreats in the market. What will happen this time? We’re optimistic the market has changed character for the better, but the nature of any pullback will be key—a deep retreat will put us back in the soup, but if not, it will confirm the bulls are in control. In the meantime, we’re going with the evidence and continuing to find a lot of new leadership to sink our teeth into.

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Better and Better

November 4, 2019

It’s not a wild, rampaging bull market out there, but there’s no question the evidence has improved steadily during the past couple of weeks—earnings season hasn’t been a bonanza, but there have been a decent number of positive reactions and breakouts, and for the first time in months, we’re seeing some follow-on buying (strength leading to more strength). There are still hurdles to overcome (most indexes are still testing the top of multi-month ranges), and short-term, investors are a touch complacent, so we wouldn’t be shocked to see some wiggles or further crosscurrents. But with more stocks acting well and with the trends of the major indexes pointed up, we think extending your line makes sense.

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Play it by the Book

October 28, 2019

The market had another constructive week, and today, the S&P 500 actually nosed out to new highs, with the Nasdaq close behind. While small- and mid-cap indexes are still further behind, the tenor of the overall market continues to improve—it’s likely not up and away, but the odds continue to favor the next big move being up. Individual stocks remain far trickier, with rotation occurring daily, but our thoughts from last week haven’t changed much: Given the many solid setups out there, a positive earnings season could launch a bunch of new leaders we can hop on (we think we’ve already highlighted some of them), but it’s still up to the bulls to produce a bunch more powerful breakouts in the indexes and individual stocks.

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Earnings Will Tell the Tale

October 21, 2019

The overall market had another decent week, with the major indexes finishing above key moving averages, though all are still stuck in multi-month ranges. But the calm action hid another round of vicious rotation beneath the surface, with most growth-oriented stocks at least taking on water, if not unraveling altogether. With few stocks in sustained uptrends and the major indexes effectively trending sideways, we continue to advise a mostly cautious stance, with small new positions and plenty of cash on the sideline. That said, you shouldn’t stick your head in the sand, either—we continue to see a good number of setups out there, and we believe a lot will come down to earnings season. A spate of breakouts would be encouraging, but as usual, we have to see it first.

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Not Dead Yet

October 14, 2019

Last Friday’s surge higher by the broad market was a powerful sign that the lack of progress by growth stocks in recent months might be over, and for that reason alone, we are raising our market gauge one notch above neutral to the 6 level. But until we see true follow-through, and numerous growth stocks hitting new highs, we can’t be sure. In the meantime, however, there are still plenty of individual stocks acting well, with the potential to make big moves if the broad market cooperates.

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The Chop Continues

October 7, 2019

The market cracked its intermediate-term uptrend last week, though it has bounced decently during the past three trading days. Overall, though, the trend is mostly sideways for the major indexes, and while many stocks are holding up well, few are actually going up. Net-net, no real money is being made out there, so we’re still of the mind that, while holding your resilient names makes sense, so too does holding plenty of cash and going slow and small on the buy side.

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Some Decent Entry Points

September 30, 2019

The broad market remains healthy, though rotation means the market’s leadership is changing more frequently than we like. Still, there are good opportunities, and this week’s issue of Cabot Top Ten Trader offers a great variety. Remember to choose your spots carefully—buying smart is half the battle—and be ruthless about pruning your portfolio of underperformers.

Our Top Pick is a lower-risk insurance company that has built a base in recent months and offers a great entry point now.

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A Constructive Week

September 23, 2019

There’s been a lot of bad news and worries over the past week, but the major indexes have hung in there pretty well, which is constructive action. Individual stocks, though, remain hit or miss, with lots of choppy action and crosscurrents out there. We continue to lean bullish, but think picking your spots (and your stocks) is vital.
This week’s list has another batch of strong actors, including a few that are pulling back normally and offering some solid risk-reward setups. Our Top Pick is one of those, and has a unique e-commerce platform that’s driving huge growth.

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