Another Point in the Bulls’ Favor

The market slid lower in volatile trading, erasing yesterday’s gains, but the major indexes maintained contact with their 25-day moving averages. At today’s close, the Dow was down 159 points and the Nasdaq was down 33 points.   

Looking at our indicators, not much has changed despite a lot of movement during the past couple of weeks. Our trend-following measures (Trend Lines and Tides) are still bullish, so the market’s major trends are pointed up. But our Two-Second Indicator remains negative, a sign the broad market remains relatively shaky.

It is true that the end of any given year—especially one that’s shown little progress like 2015—can inflate the new-low readings of the Two-Second Indicator due to tax-loss selling. Still, because the plus-40 readings began in late October, we consider the negative readings legitimate.

All that said, we’re finding more and more to like among the action of leading growth stocks. First, the leaders have performed well; many had short, sharp shakeouts three weeks ago, but none broke down and most have powered back to (or close to) new highs. Second, we’re seeing more growth stocks kick into gear.  

It’s not 1999 out there, of course; profits aren’t growing on trees, and the divergences seen among indexes and the broad market still have a whiff of long-term topping action.

But, as we wrote in last week’s issue, the market’s trends—warts and all—are still up, and the action of growth stocks is another point in the bulls’ favor.

This is an excerpt from Cabot Growth Investor, where we’ve been picking the best growth stocks since 1970. Cabot’s flagship advisory combines expert stock selection and award-winning market timing. It’s the most complete and most helpful, growth-oriented investing advisory available anywhere.

Michael Cintolo is Cabot's Vice President of Investments and Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. To read customer reviews of Cabot Top Ten Trader, click here. To read reviews of Cabot Growth Investor, click here.

Michael Cintolo can be found on Google Plus.

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Shopify (SHOP), which came public in May of last year, is a new leader.


Roy Ward uses the PEG ratio to determine if the stock is undervalued or overvalued.

For AMZN to be undervalued, the stock would need to fall to 393. 50.

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