The breadth worries that had so many traders on edge finally reared their ugly head and took a bite out of the market as the indexes took a big hit on Wednesday. By week’s end things had improved a touch, but still the S&P 500 fell 2.45%, the Dow lost 2.54%, and the Nasdaq declined by 2.71% last week.

The breadth worries that had so many traders on edge finally reared their ugly head and took a bite out of the market as the indexes took a big hit on Wednesday. By week’s end things had improved a touch, but still the S&P 500 fell 2.45%, the Dow lost 2.54%, and the Nasdaq declined by 2.71% last week.

As we head into the end of the year, markets have paused though are still bullish. A little bit of worry is a sign of a healthy market and some of the pullback is no doubt taking profits for tax reasons.

The budget showdown in Washington, which needs to be settled by Saturday, is not helpful.

The Federal Reserve cut interest rates by a quarter point yesterday and in a preemptive move, suggested only two more reductions next year. This is a signal that interest rates will remain somewhat elevated as inflation that has come down significantly remains a stubborn trend.

We wrap up a fruitful year with a December Issue of Cabot Early Opportunities highlighting five names spanning everything from bottled water to social media to bitcoin mining.

I like the diversity of this Issue, which has something for everyone.

Many are surprised to learn that the concept of telehealth wasn’t a direct result of the Covid pandemic in 2020. Indeed, the practice of online consultations between patients and medical personnel has been practiced for over 20 years, and this month’s featured company is arguably the first one to bring it to global prominence.

By most measures, 2025 looks pretty good for stocks.

The Fed has begun a rate-cutting cycle that should last for the next two years. Historically, stocks do well when the Fed is cutting rates and there is no recession. And the economy has been solid. This bull market is just 25 months old and has returned 65%. Bull markets usually don’t just run out of gas after two years. In fact, the average bull market has lasted 50 months and returned 152%.

But stocks are expensive. The S&P currently sells at 22.3 times forward earnings compared to an average of 16 times over the last twenty years. The market returned 26% in 2023 and about 28% this year with two weeks to go. It might be tough for stocks to deliver another consecutive year of 20%-plus returns.

It may be that a lot of the easy upside is behind us. Stocks can still perform well, but they’ll probably have to earn it in 2025.

In this issue, I highlight a stock that is poised for a strong earnings rebound in 2025. It is a stock that bounces a lot between the highs and lows. And it is currently well below the high. It is also one of the best healthcare companies on the market at a time when the population is older than ever before and aging at warp speed.

For the second straight week, the leading indexes went in vastly different directions as the S&P 500 fell 0.6%, the Dow lost 1.9%, and the Nasdaq gained 1%.

After a huge run, last week definitely showed some short-term character changes for many stocks, especially leading titles, with some flashing legitimate abnormal action; even among the top-down evidence, we’ve seen sluggishness, with the broad market showing wear and tear as sentiment remains relatively buoyant. That said, there are still plenty of stocks either holding their own or still doing well, too, including some growth-y themes that are seeing fresh buying of late, a sign big investors aren’t going into hibernation. When you put it all together, we do think paring back some and seeing how things play out makes sense, but it’s as important as ever to take things on a stock-by-stock basis. We dropped our Market Monitor to a level 6 and will leave it there today, but we’re flexible and could ratchet it higher if growth stocks start to rebound strongly.

This week’s list has a wide assortment of names—but nearly all of them are growth-oriented, which we take as a good sign. Our Top Pick is a mega-cap that staged an awesome breakout on earnings last week. Near-term wobbles are possible, but we think big investors will support any dip.

The major indexes have mostly held serve near all-time highs this month. But beneath the surface, some selling has emerged, as high-flying growth stocks, the Dow, small caps and the Equal Weight index are all down in December. Is it a sign of broader selling to come? That may depend on language coming out of this week’s Fed speak and presumed rate cut. Regardless, I don’t think the bull market is on borrowed time – I expect it to continue well into 2025.

With that in mind, we reintroduce one of my favorite stocks – one that I previously added in the teeth of the bear market in 2022 before it took on too much water but has been rounding into shape for more than a year. Now, Carl Delfeld is recommending it to his Cabot Explorer readers. Today, we give it a second go-round with high hopes for next year and beyond


Details inside.

For the second straight week the leading indexes went in vastly different directions as the S&P 500 fell 0.6%, the Dow lost 1.9%, and the Nasdaq gained 1%.

For the second straight week the leading indexes went in vastly different directions as the S&P 500 fell 0.6%, the Dow lost 1.9%, and the Nasdaq gained 1%.

After an amazing run higher, growth stocks hit an air pocket this week, with many highfliers coming down and some abnormal action being seen. We haven’t exactly floored the accelerator during the past few weeks, and we took our cues from individual stocks, paring back this week and leaving us with a good-sized cash position. That said, we’re not making any major market call--the trends remain up, and many growth stocks are acting OK--so while we want to see how growth reacts from here, we’re flexible and could put some money back to work soon if key names stabilize.

Since I last wrote to you on February 28, cannabis stocks have fallen nearly 14%, using the AdvisorShares Pure U.S. Cannabis (MSOS) as a proxy for the group.

There are certainly good reasons why “the doubts” have crept back into the minds of cannabis investors, which I will explain in a second. But my take is that by now, the concerns may be fully priced in, so the group looks like a solid buy.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

Earnings season is over, and the market’s main focus is on the February inflation numbers that come out this week.

Stocks were able to continue to build on last year’s late rally in January and February. Mixed Fed and interest rate news was overcome by strong earnings, particularly in technology. Signs that artificial intelligence is continuing to drive strong demand and sales lifted the sector and the market.

With the completion of the Super Tuesday primaries, the final grid for the 2024 U.S. presidential election appears to be set. While it is always possible that some surprise will lead to a different lineup on one or both cards, our country is now on track for a rematch of Biden v. Trump. The election date of Tuesday, November 5, is less than eight months away.

In today’s note, we discuss the recent earnings reports from Bayer AG (BAYRY), Duluth Holdings (DLTH) and LB Foster (FSTR).

Luxury leader LVMH Moët Hennessy (LVMUY) CEO Bernard Arnault has a mantra that can be applied to business and investing: “In times of uncertainty, be patient.”

I would add that this requires playing both defense and offense.

Our offense has been working quite well of late: Super Micro Computer’s (SMCI) share price was up another 40% this week and is now up 300% since the start of the year. Sea (SE) had a good first week in our portfolio as well, up 22% after an encouraging financial report.

The market rally is forging ahead and making fools of the doubters, despite the Tuesday pullback. The S&P 500 is up 20% since late October and 7.5% so far this year as of Monday’s close.

The good times keep rolling. The S&P 500 continues to make new highs and closed last week up 7.7% YTD. Nine of the 11 S&P sectors are well into positive territory for the year so far.

As usual, the index is being led higher by technology, which is by far the largest sector. Technology stocks are up over 12% YTD. While no other stock sectors are up as much as the overall market, most of them are delivering very respectable returns for the year so far. The only down sectors are Real Estate and Utilities. But even these beleaguered sectors are only down 1.4% and 3.25% respectively YTD.

This week, we review earnings reports from Advance Auto Parts (AAP), Berkshire Hathaway (BRK/B), Dril-Quip (DRQ), Elanco Animal Health (ELAN), Fidelity National Information Services (FIS), Gannett (GCI), Macys (M), Six Flags Entertainment (SIX), Viatris (VTRS) and Warner Bros Discovery (WBD).

WHAT TO DO NOW: Remain bullish, but continue to be selective on the buy side. The market continues to act well, and we’re encouraged by the snapback seen in many leading stocks of late, as well as a fresh barrage of positive earnings reactions in recent days. In the Model Portfolio, we’re happy to own some very strong actors, and tonight we’re going add one new half-sized stake (5% of the portfolio) in Applovin (APP), while also restoring our Buy rating on Nutanix (NTNX), which reacted well to earnings today. Our cash position will be around 28%.

It’s amazing how much some of our stocks have moved over the last week while the average gain of our portfolio is almost EXACTLY the same as that of the S&P 600 Small Cap Index.

Measuring Wednesday to Thursday early morning, shares of Remitly (RELY) are up 18%, Docebo (DCBO) is up 17% and Enovix (ENVX) is down 12%. Taking a simple average of our positions’ change over the last five sessions, though, the average change is 0.7%. That compares to a 0.8% gain in the S&P 600!

I’m going to buy back our short calls in EEM and EFA and immediately sell more call premium going out to the December 1, 2023, expiration cycle. I plan to roll our remaining October 20, 2023 call positions in SPY, TIP and VNQ tomorrow.

With the October 20, 2023, expiration cycle coming to a close in a few days, it’s time to start buying back the rest of our October 20, 2023 short calls and selling more premium going out 30 to 60 days. I’ll be sending out numerous trade alerts for the various portfolios over the next few days, including a few new names in our active portfolios.

As I stated in our earlier alert, I will be sending out numerous alerts over the next few days. With 5 days left until the October expiration cycle, now is the ideal time to begin looking to buy back our short calls and sell more call premium going out to the November expiration cycle.

Our position in TTE is up 72.6% since we introduced it back on June 30, 2023. By comparison, the stock is up only 15.2% over the same time frame. With our short calls currently in the money and October 20 expiration only a few days away, I want to buy back our October 20, 65 calls and immediately sell more calls going out to the November expiration cycle.

Alphatec (ATEC) Releases Better Than Expected Preliminary Q3 Results

WHAT TO DO NOW: In yesterday’s update we wrote that the market still had a lot to prove, and indeed, the market is down further today despite a dip in interest rates—and more important to us is that some of the resilient names are getting hit with the market. One of those is Uber (UBER), which is cracking support on no news. We’re not craving more cash, but we’ll respect the action and sell one-third of our stake in Uber (UBER) this afternoon and see how it goes from here. Our cash position will now be in the upper 60% range.

Today I want to buy back our PFE October calls and immediately sell more call premium.

I will be exiting the JP Morgan (JPM) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.

Okay, everyone, earnings season is finally upon us. I suspect we are in for an interesting earnings season, and to get us started, I will be holding a subscriber-only webinar tomorrow at 12 p.m. ET. Click here to sign-up. No worries if you can’t make it, we archive everything here at Cabot. You can find all the archived recordings here.

We have numerous positions to roll prior to the October 20, 2023. I’m going to start today with GOOGL an AMGN. I’ll be sending out several alerts over the coming days. Stay tuned!

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.