Movers & Shakers

by Michael Cintolo on October 31, 2014

This is an excerpt from Cabot Top Ten Trader, which features the best trades to make every week.  Designed for experienced investors who want even more great growth stock ideas, this advisory recommends the best 10 stocks each month for short-term investment by aggressive investors.

The market continued to impress this week, with most major indexes tacking on gains early in the week, hesitating around mid-week when the Fed cut off the money spigot, and then ripping higher later in the week, bolstered today by a surprise, monstrous easing move by the Bank of Japan.  

As we wrote a couple of weeks ago, the odds of a straight-up move following the vicious 10% correction in the big-cap indexes were very low; we can remember just a couple of times that’s occurred. But we also wrote that, if it did occur, it would represent something extremely unusual … and extremely bullish.

That seems to be playing out—barring a major collapse today or early next week, our intermediate- and longer-term trend models will flip back to positive. And, while earnings season has had its share of high-profile losers (Twitter and Netflix were two, and Facebook to a lesser extent), there’s no question that many individual stocks have shown great power during the past couple of weeks, with many bursting back to, or through, their old highs.

That said, we don’t see today as a time to buy five or six stocks; we’re not even sure a heavily invested position is the best stance, as there’s still resistance for the indexes and many stocks to chew through, and many areas of the market (notably commodity stocks) are struggling.

Still, the basis of our market timing is flexibility, and the highly unusual, bullish action since the panic low of mid-October is a sign to be leaning bullish. And the good news is that, even if you’re still holding mostly cash, there remain a bunch of stocks that could lift off in the days and weeks ahead if (a) the market continues higher and (b) earnings reports are received well. In other words, it’s not like everything has already left the station (though some of the leaders surely have).

All in all, we continue to grow more bullish as the market’s action improves. We don’t advise flooring the accelerator, but doing some buying (preferably on dips, or on powerful thrusts higher on earnings) makes sense.

Michael Cintolo is Vice President of Investments at Cabot Heritage Corporation, and Chief Analyst of Cabot Market Letter and Cabot Top Ten Trader. A growth stock and market timing expert, Mike is a true student of the market and a technical analysis specialist.

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