That said, there are still headwinds out there. Our Cabot Trend Lines (longer-term trend) remain negative, and few stocks are hitting new highs (fewer than 40 nearly every day on the Nasdaq, for instance). Not that we need to see 200 stocks hitting new highs before turning bullish, but there’s a definite lack of leadership, especially among growth stocks.
The real question on everyone’s mind is whether the rally of the past three weeks has put in a sustained bottom to this multi-month correction, or whether this rebound is more like the October-November upmove, which led to another leg down.
If forced to choose, we’d favor the “bottom is in” scenario, based on the extremes we saw in late-January/early-February in breadth and sentiment, and the improvement in the broad market—we’ve finally seen the beaten-down groups build some decent-looking bottoms and thrust higher in a significant way. (Getting the worst groups to find a low is important for overall market health.)
As usual, though, what counts to us most aren’t predictions but current conditions. Right now, we’ve seen enough evidence to begin putting money to work, but we haven’t seen enough to continue the buying spree. We’re looking for more individual growth stocks to lift off to “pull” us into a more heavily invested position, along with further market strength.
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.