Just looking at the headline evidence, it remains in good shape—the intermediate-term (and longer-term) trend of the indexes is up, and the same can be said for most growth measures. The only “problem” is that the action, while positive, isn’t very powerful: Some indexes that are technically trending up are still battling with resistance and haven’t made much progress for many weeks or months, and the same can be said for a lot of individual stocks, including some formerly leading areas (like chip stocks) that continue to lag. Thus, we’re sticking with our current stance—leaning bullish for sure, but picking our spots and stocks carefully and not rushing into things. We’ll again leave our Market Monitor at a level 7 tonight.

This week’s list is well-rounded, though for our Top Pick, we’ll go with a super-strong name that looks like one of the leaders of a potential group move.

Stocks cooled off this past week, though they mostly held their gains, which is not a bad way to close out an unusually productive September. Investors can likely thank the Fed for that. But many potential landmines (presidential election, escalating tensions in the Middle East, another jobs report this week) loom, so we’ll see how things go as we enter an uncertain October.

Given all the uncertainty, today we add a large-cap value stock that I recently recommended in my Cabot Value Investor portfolio. It’s one of the largest banks in America, and it’s potentially on the cusp of getting much bigger. Last year, it caught the attention of Warren Buffett. And so far, his bet on it appears to be paying off – with more upside ahead.

Details inside.

It was a mostly quiet week for the market, which isn’t terribly surprising as traders have moved past the Federal Reserve event and inch towards the election. By week’s end the S&P 500 had gained 0.4%, the Dow had rallied 0.5% and the Nasdaq had fallen 0.55%.

It was a mostly quiet week for the market, which isn’t terribly surprising as traders have moved past the Federal Reserve event and inch towards the election. By week’s end the S&P 500 had gained 0.4%, the Dow had rallied 0.5% and the Nasdaq had fallen 0.55%.

The MSCI World Index now has a remarkable 72% market value weighting in U.S. stocks.

In other words, 72% of the market value of stocks trading around the world represent companies headquartered in America.

This begs the question: Should investors be this concentrated in a single market?

Cannabis investors remain in a depressed state, despite several potentially bullish developments that could move stocks in the sector up significantly over the next year.

For much of the last two years, the white-hot semiconductor space was the industry group least likely to yield any meaningful turnaround candidates. But that dynamic changed following this summer’s tech sector sell-off, which brought many of the previously high-flying chip stocks back to earth (or at least further away from the firmament).

A new era has begun.

Most of the last two years have been an environment of rising and high interest rates and technology sector dominance. Now, we are entering a period of falling interest rates and a slowing economy. The new stage will bring different winners and losers.

The previously beleaguered interest rate-sensitive stocks and defensive stocks ignited and began to lead the overall market higher as technology pulled back. Since the summer, this new trend has been confirmed. And it is unlikely to be a mere short-term gyration but rather the beginning of a new environment that should last for some time.

In this issue, I highlight a great monthly income stock. The yield is massive, and it provides a high income in an uncertain market. The stock also can provide great price performance when the interest rate cycle goes its way. This point in the cycle provides a great opportunity to get a high income and total return on the right side of a pronounced market shift ahead.

Aided by a strong week for the market following the Federal Reserve interest rate cut, our three September covered calls (SFM, CPNG, SG) expired for profits ranging from 4.62% - 6.25%.

This week we turn our attention to the October expiration cycle via a covered call sale in a grocery delivery play that is breaking out to new highs.

Between the late-July/early-August market plunge and the relatively sharp post-Labor Day selloff, more than a few weak hands were likely kicked out of their positions. That paved the way for the past two weeks, which have been very encouraging, with the major indexes certainly improving and with many of those same leaders acting well, including a bunch that moved to new high ground. It’s all to the good, though a lot of the same flies in the ointment that we’ve written about are still out there, too. There’s definitely more good than bad out there, but we continue to pick our spots. We’ll leave our Market Monitor at a level 7 today.

This week’s list has something for everyone, from high-tech to infrastructure to stocks leveraged to asset prices. Our Top Pick is a potential liquid leader that, after a few months of choppy action, looks to have finally broken out on the upside.

Our national high-interest-rate nightmare is over, as the Fed has (finally) started slashing short-term rates in a big way, cutting by 50 basis points last week. The market likes the aggression, sending two of the three major indexes to new all-time highs. Is it the beginning of a new – and more egalitarian – leg of the bull market? Could be. Regardless, let’s strike while the iron is hot, adding shares of the leading company in one of the hottest new U.S. markets: sports betting. It’s a recent recommendation from Mike Cintolo in his Cabot Top Ten Trader advisory.

Details inside.

As I noted last week, because of family travel this Monday’s update is focused on our open positions. Let’s dive in …

It’s earnings season again! And this one should be more important than most.

Earnings are, of course, a big deal for the individual company. But in addition to company-specific fundamentals, Wall Street will be carefully watching what company earnings indicate about the macro environment.

Earnings season has arrived, and with it could be a recalibration of investor expectations for stocks broadly.

The S&P 500 Index seems reasonably priced at 19.5x estimated 2024 earnings. But nearly 30% of the index’s weight comprises Magnificent Seven stocks, whose average multiple is 33x. Estimated earnings growth rates for these Mag Seven stocks, which average 19% for each of the next five years, set a high bar. When high expectations meet less-high reality… well, investors know what can happen to stock prices. And, any wobbling in the largest stocks can send the market broadly lower. As Dennis Gartman, the legendary and now-retired writer of The Gartman Letter, frequently said, “When the generals leave the field, the rest of the army follows.”

The market surge has leveled off. The expectation debate about peak interest rates, inflation, and recession continues. And now, it’s another earnings season.

The S&P 500 pulled back during the first trading week of the year after a two-month, 15% spike. In the second week, the index gained back everything it lost the first week. He we are again on the cusp of the all-time high set about two years ago.

In today’s note, we discuss the earnings reports from Wells Fargo (WFC). Please note that our comments on Well’s earnings didn’t make it into the podcast.

The first two weeks of 2024 have been a bit sloppy with the markets down the first week, strengthening a bit this week then back down again today as this morning’s inflation numbers (CPI) came in a little higher than expected.

Thus far small caps have lagged large caps this year at the index level, though it’s not worth overthinking it too much just 11 days into the year.

A major challenge in 2024 for investors and analysts alike will be separating the artificial intelligence (AI) “pretenders” from the “contenders.” Super Micro Computer (SMCI), a recent Explorer recommendation, was up 23% this week, and Exscientia (EXAI) shares were up 13% yesterday.

Back on December 27 I suggested holding off on cannabis sector purchases given the group strength at the time. We had realized nice gains, and it did not make sense to chase the stocks. “I prefer to add on weakness rather than strength,” I wrote. I recommended adding on weakness of 2% to 4% or more in any of our portfolio names.

The AdvisorShares Pure US Cannabis (MSOS) and AdvisorShares MSOS 2X Daily (MSOX) exchange traded funds (ETFs) closed that day at 6.93 and 3.60, respectively, and went on to fall 4.5% to 9% over the next few trading days.

It’s been widely noted that the stock market’s sloppy start to 2024 is among the worst in a decade, or longer. Traders and TV commentators carry on about how the first trading day, or week, or month, sets the tone for the entire year. “How goes January, so goes the year” is a frequently bandied saying. It’s enough to make an investor toss in the towel and wait until 2025.

The longer I am in the investing world, the less I listen to this banter. It all sounds great, and maybe there are some years in which these ultra-short-term trends-as-predictors pan out, but they are so unreliable that they are worthless at best. Even if they had a 100% accuracy rate, why make a bet that this perfect record will continue?

The new year started with a whimper. Last week’s 1.5% down move ended a streak of nine consecutive up weeks for the S&P 500, the longest streak since 2004.

The streak had to end eventually. And a pullback after a 15% move higher is normal. Bull markets tend to have several 3% and 5% down moves. There may be more downside in the weeks ahead. But we are still in a market that is trending higher.

In today’s note, we discuss the recent earnings reports from Walgreens Boots Alliance (WBA). Our note also includes the monthly Catalyst Report and a summary of the January edition of the Cabot Turnaround Letter, which was published a week ago Wednesday.

All right, it’s time to start selling some more premium.

We currently have one open position (currently profitable), an iron condor in SPY, and I want to add another iron condor today, this time in the Russell 2000 (IWM).

I will be sending out numerous alerts over the next few days. With 9 days left until the September 15 expiration cycle, now is the ideal time to begin looking to buy back our short calls and sell more call premium going out to October 13, which has 37 days left until expiration.

WHAT TO DO NOW: The market’s action of late is encouraging for sure, but there’s still more work to do with our Cabot Tides and growth funds. Today we’re going to sell our small remaining position in DoubleVerify (DV) and hold the cash—with an eye toward redeploying the funds in the near future should the market and individual stocks continue to firm up. Our cash level will now be around 45%.

The Yale Endowment portfolio continues to shine, outperforming our benchmarks with portfolio gains currently reaching 18% since we initiated the portfolio back in mid-June of last year. We have two short call positions due to expire today, so I want to buy them back and immediately sell more call premium.

Our WBA calls are essentially worthless and due to expire. As a result, let’s buy back our short calls and immediately sell more call premium.

Moving Ironwood Pharmaceuticals (IRWD) to Sell

Academy Sports (ASO) Dips on Dick’s Sporting Goods’ (DKS) Horrible Quarter

I’m selling calls against our newly assigned shares today, per our Income Wheel strategy. I will be sending out another alert shortly to sell calls against our GDX and KO positions.

We are rolling our last two August 18, 2023, expiration positions into the October 20 expiration cycle. Next week, I hope to add several new positions to our active portfolios … stay tuned!

Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.

The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.

Our position in TTE is up over 30% since we introduced it back on June 30, 2023. The stock is up only 8.5% over the same time frame. With our short calls currently in-the-money and August expiration tomorrow, I want to buy back our calls for August and immediately sell more calls going out to the October expiration cycle.

All right, let’s get back at it.


As stated on our subscriber call today, I’m going to sell an iron condor in SPY and intend on adding, at least, two more trades over the next week. Volatility, as seen through the VIX, has kicked up to roughly 17, so it’s time to sell some premium.

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 Top Ten 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 Top Ten features.