Not too much to report this week as we simply allow our August positions to erode in value, which as options premium sellers is a good thing. We enter earnings season this week, so I fully expect to add several positions to the portfolio over the coming weeks. We currently have six open position with the intent of getting up between eight and 10.

We finally had the opportunity to take off our August 18, 2023 462/466 bear call spread for a decent 7.8% gain. Certainly nothing to write home about, but given the rise in the SPY since we opened our 462/466 bear call spread back on June 30, we were more than happy to lock in a profitable trade. We were in the trade for 37 days.

Several days after we locked in our profit in the SPY 462/466 bear call spread we were given the opportunity to lock in another winner, a 9.9% profit in our SPY September 15, 470/475 bear call spread. We were in the trade for 7 days.

As earnings season winds down, we are greeted with several nice trading opportunities in some big names including Home Depot (HD), Target (TGT), Cisco Systems (CSCO) and Walmart (WMT).

After a slow earnings week last week things pick back up on the earning front this week. My hope is that we are able to make two, if not three trades this week with the focus being on the four trades in the Weekly Watchlist below. As we discussed on our subscriber call last week (out last call for this earnings cycle), we have several quality opportunities in front of us. Now let’s hope Mr. Market offers us some decent probabilities and premium so that we can take on a few short-term earnings trades.

Stop me if you have heard this before, but inflation data and the moves in the bond market continue to be the major drivers of the market’s moves. And last week traders weren’t thrilled with these inputs as the S&P 500 fell by 1%, the Dow gained 0.5% and the Nasdaq continued its recent weakness with a further decline of 2%.

The overall market has started to pull back, and the encouraging news is that, from a top-down perspective, things are under control--our trend-following indicators are positive and the retreat to this point has shown little, if any, abnormal qualities. The problem, though, is growth stocks, as many of them haven’t just fallen, but decisively cracked their intermediate-term uptrends, often after quarterly results--that’s not something we can ignore, and so we’ve been selling and have quickly built up a big (50%-ish) cash position. Near-term, we expect this correction to go further, but the odds continue to favor a resumption of the bull trend once the selling finishes up.

In tonight’s issue, we write a lot about this earnings season and some slightly different tactics we may use going ahead, aiming to still give us long-term upside but better protect ourselves against trends that don’t persist. We also review a bunch of new names and offer plenty of commentary about the good, bad and ugly of the stocks we own and are watching.

In this week’s Cabot Explorer issue, Novo Nordisk (NVO) stock surges on the back of positive data on its best-selling weight loss drug Wegovy, U.S.-China tensions rise again, and we add one of the signature growth stocks on the market to our portfolio. Enjoy!

The markets traded sideways through most of April. But since then, the choppiness has returned—along with worries about the uncertainty regarding the debt ceiling, the expiration of the immigration-limiting legislation, and ongoing debate about the possibility of a recession.

Yet, economically speaking, the trends are still healthy. Manufacturing has held up, employment continues to rise, and job openings are still underutilized (as you can tell if you’ve been in a restaurant lately!).

The market looks great right now. Inflation is falling fast, the Fed is just about done hiking rates, and there is no recession in sight. It looks like we will get through the steepest rate-hike cycle in decades without much economic pain.

But nothing is certain. Inflation could rise again. The Fed may keep rates high for longer than the market expects. The economy may turn south in the quarters ahead. There could be more trouble with bank failures or the war in Ukraine. S&P earnings have been contracting for three straight quarters.

We’ll see if the market can add to the 30% rally from the low, or if it turns south again. A reasonable argument can be made for either scenario. Instead of trying to guess the possible short-term gyrations, let’s look to investments that should be longer-term winners no matter what.

In this issue, I highlight a stock that diversifies the portfolio into the consumer space. The company operates in an incredible niche market that has provided earnings growth for 31 consecutive years and enabled the stock to outperform the market in every measurable period over the last 15 years. The company is positioned for strong growth in the years ahead and the stock has a long track record of delivering stellar returns in all kinds of markets.

Today, I’m recommending a company that has been on my watch list for several months. It looks too compelling to ignore.

Key points:

• No debt and 37% of its market cap in cash.
• Cheap valuation. Good dividend yield and share buyback program.
• High insider ownership.

All the details are inside this month’s Issue. Enjoy!

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

After two-plus months where sellers really couldn’t make a dent in the market, last week was a change, with the major indexes down and, more important to us, many growth stocks decisively cracked near- to intermediate-term support. On the flip side, the vast majority of the top-down evidence remains positive, some growth names are holding their own and a bunch of industry, energy, transport and other cyclical names are still acting fine. Put it together and we think it makes sense to pull in your horns a bit for now, but we’re also not selling wholesale, as the odds continue to strongly favor the market (and many leaders) working its way higher once this selling squall passes. We’re moving our Market Monitor down to a level 6.

Interestingly, despite the market’s hiccup, it wasn’t hard to find a bunch of solid charts (and some solid setups) in a variety of sectors, as you’ll see in this week’s list. Our Top Pick is a cookie-cutter retailer that looks to have finally emerged from a long bottoming effort.

The stock market is resuming its downward slump, creating a drag on investor enthusiasm for buying shares. In many ways, this effect is no different from how consumers approach the purchase of any other item – if you are reasonably confident that the truck/house/trinket/whatever you are wanting to buy will be cheaper in a few weeks, you will wait to make your purchase.

The market rallied strongly off the lows last week, moving 6% higher on the week.
Is the bottom in?


I doubt it. The market has behaved this way all year. There has typically been a rally after intense selling and a new low. But stocks have difficulty generating any lasting upside traction in the face of high inflation, an aggressive Fed, and a slowing economy.

There was little news this week, but I wanted to highlight two things that are on my mind.
First, small and micro-cap stocks look incredibly cheap.

I am making one change to the four-ETF Undiscovered model. I am selling the Direxion Daily S&P 500 Bear 1X Shares (SPDN), a 20% position, and replacing it with the ALPS Medical Breakthroughs ETF (SBIO) in the 20% portfolio slot.

FTX, the cryptocurrency exchange founded by Sam Bankman Fried, remains well capitalized and has been stepping in to provide liquidity to other firms such as Voyager Digital and BlockFi. The FTX US exchange continues to be a great option for our traders to utilize. Other exchanges that I recommend are Coinbase and Binance. These “big three” crypto trading platforms have significantly less liquidity issues and better risk profiles when compared to other niche players.

This week’s Friday Update includes comments on our companies. There were no ratings changes or earnings reports. Look for the July edition of the Cabot Turnaround Letter next week, where we update our semi-annual Equity Market Outlook and our High Yield Bond outlook and offer up our July feature recommendation.

The major indexes are up today, led by the Nasdaq, while growth stocks are beginning to perk up. As of 3 pm EST, the Dow is up 46 points and the Nasdaq is 132 points, while some growth funds are up 2% to 4% today.

It continues to be a sloppy market but we’re working through it and there will be big opportunities in small-cap stocks on the other side of this.

The market has deteriorated over the past couple weeks. The S&P 500 fell into a bear market on June 13th. The combination of continuing high inflation and a more aggressive than previously expected Fed has led to widespread expectations of recession over the next year.

Recessions are bad for stocks for obvious reasons. But there is something worse than recession, looming recession. Stocks generally recover during a recession. Because the market anticipates, it tends to rebound before the economy. The worst environment for stocks tends to be prior to recession, upon expectation, to part of the way through it.

Looking at the weekly charts, last week created some damage, technically. The S&P 500, tech-heavy Nasdaq 100 and the Greentech ETFs all gapped lower with last week’s action. A price gap typically creates resistance, and the pushback here is made even sturdier because the gap coincides with the 40-day moving average for Greentech (the S&P and Nasdaq 100 are well below their 40-day averages today). That means that even while we’re looking at posting the third straight up-day in the Greentech sector for the week, it’s not a time to get overly optimistic.

It was a quiet week last week, but there was one update that I wanted to highlight.

Years ago, on a visit to New York City, I was invited to participate in a wine tasting seminar. My knowledge of wine was rudimentary at best when I attended, and so it remains today.

Two days into 2022 and we’re seeing another round of selling in growth names, especially software, fintech, medical devices and e-commerce. Many names are retesting their November and/or December lows. We have seen a few names crack their 200-day lines, while a few others have begun to rebound intra-day.

Two days into 2022 and we’re seeing another round of selling in growth names, especially software, fintech, medical devices and e-commerce. Many names are retesting their November and/or December lows. We have seen a few names crack their 200-day lines, while a few others have begun to rebound intra-day.

This payments company is expected to grow at an annual rate of almost 18% over the next five years.

We’re going to kick off the first trading day of 2022 by taking profits in a few names.

This food producer is a good turnaround candidate, with double-digit earnings expected next year.

Earnings estimates have been boosted by 13 analysts for this automaker.

This medical diagnostics company has a habit of being underestimated by Wall Street. The company beat earnings estimates by $0.58 in the last quarter.

This energy company is forecast to grow at an annual rate of 56.96% over the next five years. Its current annual dividend yield is 1.89%, paid quarterly.

The earnings of this biotech company are forecasted to grow by 49.3% next year.

This financial services company reported record revenue, net income, and earnings per share for the first nine months of the year.

Our warrants for LiCycle (LICY.WS) are being redeemed by the company.

This software company just posted a 43% increase in quarterly revenue, and Jim Cramer has recently recommended it.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Momentum Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Momentum Trader features.