Three Reasons I'm Bullish on the Stock Market

Dovish hints from the Federal Reserve this week caused another rush of buying, making it six weeks up out of seven for the major indexes since they hit bottom in early February.

In the short-term, we wouldn’t be surprised if the market pulled back as April gets underway. Earnings season is coming up, remember, which can often cause some jitters. And while overall sentiment is hardly bullish, there is definitely a relative lack of things to worry about these days … something that often precedes some weakness.

That said, we’ve grown incrementally more bullish in recent days for three reasons. First, the broad market continues to impress—the number of stocks hitting new lows has declined to extremely low levels for the past four weeks. Coming after many months of intense pressure, it’s a good sign that the storm is over.

Second, the longer-term trend is now neutral. If the S&P 500 can close this week and next week above 2,000 or so, and the Nasdaq can close both weeks above 4,815 or so, the major trend will turn up.  

And third, we’ve seen more encouraging action among growth stocks. It’s certainly not excellent action (the number of new highs remains tame on the Nasdaq), but it’s improving.

For these reasons, we’ll probably bump up our Market Monitor another notch on Monday; the way we run our portfolio, something in the 65% to 70% invested range makes sense at this point.

As for buying, right now you should do so on a stock-by-stock basis; if something is breaking out of a multi-week base on big volume, by all means, take a swing at it. And if a strong stock pulls back for a week or two near some support, that’s also fine.

But be careful not to get too excited here and buy stocks that are extended to the upside and have been running higher for a few weeks, especially if they have earnings reports coming up soon.

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.

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.

Stock Picks


This stock could rise 50% before becoming fairly valued.

This hot technology company is growing like a weed, thanks to products that speed up cloud communications.

This stock is somewhat well known, but far from well loved.

Cabot Wealth Advisory

Nine Characteristics of Great Growth Stocks

By Timothy Lutts on October 24, 2016

Recommending great growth stocks is our specialty at Cabot. But so is education--we want you to be able to find growth stocks on your own too. Here are nine characteristics of what to look for.Read More >

How to Find Great Growth Stocks in a Scary Market

By Paul Goodwin on October 21, 2016

Even in today’s scary market, there are great growth stocks out there. Here’s how to find them—and how to avoid the kind of losses that can haunt your portfolio.Read More >

Buy This Small-Cap Tech Stock as the Nasdaq Thrives

By Tyler Laundon on October 20, 2016

Technology stocks are thriving, as the Nasdaq has been outpacing the S&P 500 and the Dow for months. And one small-cap tech stock in particular is outperforming the industry’s big boys. Read More >