The Insider Report: Bulls Establish a Beachhead, but Downside Risks Persist

Market Overview

It was a record-setting week for stocks in many ways. We saw one of the biggest volatility crushes in history, along with one of the biggest one-day rallies in history after a 90-day tariff pause was announced last Wednesday. Stocks finished the week higher after all the drama, with the Nasdaq leading the way to the upside. The tech-heavy index finished 7.29% higher, while the S&P 500 and Dow Jones Industrial Average were up 5.70% and 4.95% respectively. Gold continues to steal the show as it hit another new all-time high, while bond markets reeled after liquidity conditions were starting to break down. Let's see if we get some more reprieve going into this week.

Stocks I Like

CSG Systems (CSGS) +29% Return Potential

What's Happening

• CSGS (CSG Systems International, Inc.) is a leading innovator in the business support systems sector, committed to advancing revenue management, customer experience, and payment solutions, providing a diverse portfolio of SaaS-based tools primarily for the communications industry.
• The company's revenue and earnings have moved in the right direction (increasing). The most recent quarterly results showed revenue at $290.59 million and earnings at $34.47 million.
• This valuation on CSGS is pretty good for a growth name. Its P/E is at 19.10, its Price-to-Sales is at 1.39, and its EV to EBITDA is at 9.65.
• At a technical level, it would be ideal to see CSGS hold technical support here and try to form a higher-low. It's already showing some relative strength against the overall market.

Why It's Happening

• CSG Systems recently secured a $600 million revolving credit facility, replacing its previous arrangement with improved terms, fewer financial covenants, and reduced restrictions. This facility strengthens the company’s liquidity position, enabling it to fund growth initiatives, pursue strategic acquisitions, and weather economic uncertainties. 
• CSG’s 2025 State of the Customer Experience Report highlights actionable strategies for brands to improve CX through personalization, AI integration, and data consolidation. By addressing key pain points in the CX industry—such as excessive communication and fragmented technologies—CSG positions itself as a thought leader capable of driving measurable business outcomes for clients. 
• The company’s emphasis on linking CX initiatives directly to financial outcomes sets it apart from competitors. By proving how CX programs generate revenue, reduce costs, and enhance brand equity, CSG ensures that its solutions resonate with CFOs and decision-makers. This approach not only strengthens client relationships but also drives recurring revenue streams critical for long-term growth.
• CSG’s SaaS-based offerings provide scalability and adaptability across industries, ensuring steady demand even during economic downturns. Its solutions help businesses optimize operations while enhancing customer engagement—key factors for resilience in volatile markets.
• CSG Systems has raised its quarterly dividend by 7%, marking its 12th consecutive year of dividend increases. The new payout of $0.32 per share underscores the company’s commitment to returning capital to shareholders while maintaining robust cash flow generation. 
• Q3 2024 revenue reached $295.14 million versus an estimate of $283.13 million—a clear indication of strong demand for its solutions.
• A modest short squeeze could eventually play out in this name as around 11% of the floated shares are sold short right now.
• Analyst Ratings:
• Stifel: Buy
• RBC Capital: Outperform
• Wells Fargo: Equal-Weight

My Action Plan (29% Return Potential)

• I am bullish on CSGS above $49.00-$50.00. My upside target is $75.00-$76.00.

Celsius Holdings (CELH) – 39% Return Potential

What's Happening

• CELH (Celsius Holdings, Inc.) is a leading innovator in the functional beverage sector, committed to advancing fitness and energy drink technology, providing a diverse portfolio of health-focused, metabolism-boosting energy drinks for active lifestyles.
• This company has volatile revenue and earnings, but their latest quarterly report showed revenue at $332.2 million but a loss at $25.79 million.
• Valuation in CELH is high. P/E is at 78.80, Price-to-Sales is at 6.21, and EV to EBITDA is at 55.75.
• From a charting perspective, CELH is trying to breakout from a broadening bottom formation. This could lead to a corrective rally in this stock.

Why It's Happening

• Celsius Holdings recently acquired Alani Nu, a prominent brand in the women's energy drink market. This strategic move positions Celsius to capture a growing demographic of health-conscious female consumers, diversifying its product offerings and expanding its market share.
• Truist Financial upgraded Celsius from “Hold” to “Buy,” raising its 12-month price target from $35 to $45. This reflects renewed confidence in the company's growth trajectory following the Alani Nu acquisition. With consensus ratings among analysts pointing to further upside potential, investor sentiment is shifting bullishly.
• Celsius has leveraged strategic distribution partnerships, including its exclusive deal with PepsiCo for North American distribution. This partnership ensures widespread availability of Celsius products, boosting brand visibility and driving sales growth both domestically and internationally.
• The functional beverage market is growing rapidly as consumers shift away from traditional sugary drinks toward healthier options. Celsius' low-calorie, no-sugar energy drinks align perfectly with these trends, giving it a competitive advantage and driving sustained demand for its products
• Celsius' collaboration with PepsiCo not only enhances distribution efficiency but also provides access to PepsiCo's extensive network and marketing expertise. This partnership has been instrumental in scaling operations and solidifying Celsius' presence in the competitive energy drink market.
• Over the past year, Celsius has demonstrated robust revenue growth, driven by increasing consumer demand for healthier energy drink alternatives. Its ability to capitalize on health-conscious trends positions it as a leader in the functional beverage market, with significant potential for long-term growth.
• CELH has a short interest of around 14% on its floated shares – a squeeze could follow.
• Analyst Ratings:
  • Needham: Buy
  • Roth MKM: Buy
  • Stifel: Buy

My Action Plan (39% Return Potential)

• I am bullish on CELH above $30.00-$31.00. My upside target is $52.00-$53.00.

McDonald's (MCD) – 19% Return Potential

What's Happening

• MCD (McDonald’s Corporation) is a staple in the global fast-food sector, committed to advancing restaurant technology and providing a diverse lineup of convenient dining options for customers worldwide.
• This company has the revenue and earnings of a market giant. Recent reports showed quarterly revenue at $6.39 billion and earnings at $2.02 billion.
• Valuation in MCD is a bit high. P/E is at 26.33, Price-to-Sales at
• From a charting standpoint, MCD remains in consolidation mode within the rectangle. If it's correcting through time instead of price, it's very bullish.

Why It's Happening

• McDonald's recent partnership with Minecraft for the "A Minecraft Movie" Happy Meal and themed menu items is a marketing masterstroke. This collaboration taps into Minecraft's massive global fanbase, introducing exclusive collectibles and in-game features that appeal to both gamers and families. Limited-time campaigns like this drive foot traffic and increase average spending per customer, which could positively impact Q2 revenues.
• The introduction of value meals, such as the $5 combo meal, has proven effective in attracting budget-conscious customers while increasing average spending per visit. By balancing affordability with profitability, McDonald's strengthens customer loyalty while boosting same-store sales—a critical metric for sustained growth.
• McDonald's has consistently distributed dividends, contributing significantly to its TSR. With a market capitalization exceeding $214 billion and robust cash flow generation, the company is well-positioned to continue rewarding shareholders through dividend increases, making it a reliable income-generating investment.
• Despite facing challenges such as an E. coli outbreak in Q4 2024, McDonald's exceeded Wall Street expectations with a 0.4% increase in same-store sales when analysts had predicted a decline. This resilience demonstrates the company's ability to recover quickly from setbacks and maintain operational efficiency, which bodes well for future earnings growth.
• McDonald's boasts a PE ratio of 26.31 and a beta of 0.62, indicating steady growth with relatively low market volatility. These metrics highlight its attractiveness as a stable investment option in uncertain economic conditions.
• McDonald's has delivered an impressive total shareholder return (TSR) of 15% over the past year, including dividends. This performance exceeds its annualized return of 13% over the last five years, showcasing consistent growth. Investors are rewarded not only through share price appreciation but also through dividends, making MCD an attractive long-term investment.
• Analyst Ratings:
  • Citigroup: Buy
  • Morgan Stanley: Overweight
  • Needham: Hold

My Action Plan (19% Return Potential)

I am bullish on MCD above $278.00-$280.00. My upside target is $370.00-$380.00.

Market-Moving Catalysts for the Week Ahead

Let's Just Admit – We All Listen to the Market

The market set records last week, registering some of the most powerful up days in history, along with some of the biggest one-day volatility drops in history. A lot of people like to pretend that policy makers are in control of the market, when I would argue that it's actually the opposite.

In other words, I think policymakers are much more responsive to the market than we give them credit for. This goes for both the Fed, Congress, and the President. Markets were roiling last week and liquidity was nowhere to be found. I'll share more about this below, but it wasn't long after where President Trump announced the pause on tariffs for 90-days.

Interestingly, we saw a scenario where the market was expecting the Fed to cut rates by the May 7 meeting. Then after the rebound, the expectations shifted back to June. Coming into this year, the market was looking for only 2 rate cuts. Then as market conditions deteriorated, it's a toss up between 4 or 5 cuts now.

Upending the Global Trade Order – No Small Matter of Business

To give you an idea of how unprecedented this market environment is, when is the last time we had a situation where the global trade order was being tossed aside? Ever since the end of World War II, the global economy has moved towards one of open trade. Whether or not such trade has been "fair" is a conversation for another time.

Some may point to the Smoot-Hawley tariffs that passed in the 1930s as the last time we had protectionist policies. Some even take it a step further and say it's the reason behind the Great Depression. I think that's a bit of a stretch given governments around the world were already defaulting on their debt before the tariffs even came into effect. Plus, the market had already peaked.

So what comes next? It seems that the goal is a multilateral trade order versus a U.S.-centric one. Is that the best path forward? Nobody really knows. But markets are certainly adjusting. The world wants to sell to the U.S. as the country accounts for roughly 1/3 of global consumption. Without access to American markets, net exporters have a big problem on their hands. Hopefully we get some clarity in the coming weeks before the 90-day window expires.

Sector & Industry Strength

There's only one sector in positive territory from the start of Q4 2024 now, and that's financials (XLF). Banks just kicked off earnings season, so we'll see if they can help breathe some life back into that sector.

Everything else is lower, with basic materials (XLB) and energy (XLE) leading the way down. Interestingly, if we took the inflationary tariff talk out of the equation, the market does not seem concerned at all with rising prices at the moment.

My big concern remains with the tech sector (XLK) in these rankings. The market is going to have a tough time rebounding with it being so low compared to its peers. Not to mention, you have consumer staples (XLP) outperforming consumer discretionary (XLY), which isn't bullish either.

Editor's Note: Bulls have a beachhead with technology leading on the week. It's still early to give the "all clear."

What Happens When There's Nowhere to Hide? (Sector ETF: SPY/TLT) 

When it comes to volatility, it's important to remember that it works both ways. Some of the price action between stocks (SPY) and long-term Treasuries (TLT) last week gave me flashbacks to the 2022 market. Let me explain.

The bear market of 2022 was highly unusual from the perspective that there was nowhere to hide. Both stocks and bonds were down that year, and for a brief period in the past week or so, that scenario played out again.

To be clear, the trend is still up on this ratio between stocks (SPY) and long-term Treasuries (TLT). When the ratio collapsed in the past couple of weeks, it was a risk-off signal, but if it continues its rise, it signals risk-on.

Count on the Chips (Sector ETF: SMH/QQQ) 

When it comes to stocks, there are certain signs that we look for to give us the "all clear" for a market bottom. One of my favorite ratios to reference is the one between semiconductors (SMH) and the Nasdaq 100 (QQQ).

When markets move back into "risk on" mode, it's often accompanied with semiconductors outperforming the Nasdaq 100. In other words, this ratio is rising. The logic behind this ratio is that all of these innovative tech companies need chips to innovate and build. If chip demand is weak, the market is weak.

We were observing a falling wedge a few weeks ago, but the ratio broke below the lower trendline. With the snapback rally we saw last week, we can start looking at the possibility of a false-breakdown, and as the saying goes… "From false moves, come fast moves." Watch chips closely.

The Danger of a Spread Blowout (Sector ETF: HYG/IEI) 

I talk a lot about credit spreads in this Insider Report, because if you want to understand how to measure liquidity, there is no better metric. Even better is the fact that it comes directly from the market itself – it's not a matter of opinion.

This week, we're looking at spreads between junk bonds (HYG) and 3-7 Year Treasuries (IEI). Note how the ratio peaked in January and how we experienced a false-breakout from the saucer pattern. In other words, we got the spread blowout that warned of weakening liquidity conditions.

I need to see this ratio rally back and make new highs to get the all clear. But in terms of surviving the market near-term, I'm okay with it taking time to reach that level too. As long as it's not plunging lower, liquidity aren't worsening from here.

My Take:

It was the bond market that got President Trump to capitulate last week. It's worth pointing out how junk bond spreads blew out sooner than investment-grade corporate spreads, which we looked at last week.

Remember that the federal government cannot afford to have interest rates rise again. That would be the case if they were truly serious about shoring up federal finances, because we have a whole lot of debt maturing this year. The policy is all about lower rates.

Cryptocurrency 

Bitcoin remains a pivotal technical juncture having tested the critical support level around $77,000, which marks the breakout zone from the November 2024 rally. This price level has significant historical importance, having served as the springboard for Bitcoin’s explosive move above six figures.

What makes this setup particularly compelling is the context of the correction. After reaching all-time highs around $108,000, Bitcoin has undergone a healthy 30% pullback – a magnitude consistent with previous bull market corrections before continuation. 

Looking ahead, this technical structure creates a favorable risk-reward scenario for long positions. With price testing a major structural support level, traders have a clear invalidation point just below the $70,000 mark. The first significant resistance appears around the $84,000-$85,000 zone, with additional hurdles at the declining trendline currently near $88,000. A break above this descending resistance would signal a potential trend change and open the path toward retesting the $92,000-$96,000 region.

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