Movers & Shakers

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 growth investors.

From a top-down perspective, the market has performed impressively this week—the major indexes have built on their successful re-test of the August lows last week (complete with positive divergences from the broad market, such as fewer stocks hitting new lows and fewer stocks below their 200-day moving averages) with persistent and powerful upside, turning the intermediate-term trend of the market strongly up.

Under the market’s hood, however, the situation is anything but clear.  On balance, most growth stocks have either sagged or stagnated this week, with the vast majority of the buying concentrated in the groups that have been performing the worst in recent months (commodities and industrials), combined with some defensive and interest rate-sensitive actors (REITs, consumer staples, etc.).

Overall, we’re certainly going to respect the action of the indexes; we’ve seen enough strength to move to a more neutral stance in our Market Monitor, which means opening up the wallet a little bit when it comes to new buys. But given the wild action among individual stocks and the still-iffy longer-term trend of the market, we advise going slowly—this type of action, where few investors are rowing in the same direction and defensive and beaten-down stocks are getting most of the money, can often lead to bad things.

There are some bright sports among growth stocks, however. Many have set up in reasonable-looking launching pads, and with an intermediate-term uptrend in the market and with earnings season just around the corner, we wouldn’t be at all surprised if these set-ups lift off in the weeks ahead. They could be setting up their plays now.

Of course, we don’t predict; we go with what the evidence dictates. Today, that means putting some money to work in stocks that have hung in there relatively well during the market downturn and have shown some buying power in recent days. If that leads to some profits, we’ll extend our line—but if not, we’ll hold a good chunk of cash and watch our stops.


Michael Cintolo can be found on Google Plus.

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