Cannabis stocks have fallen sharply since the beginning of April. The AdvisorShares Pure U.S. Cannabis (MSOS) is down 15.4% since April 1. There are two reasons.

First, investor enthusiasm for stocks overall has waned, creating significant declines across indices. Because cannabis is perceived as a riskier sector, cannabis stocks decline more than most stocks when investors move into risk-off mode.

Second, many analysts and investors had hoped for visible progress on key catalysts by now – chiefly rescheduling and cannabis banking reform. They have been disappointed.

In twenty years of price forecasting, the most valuable lesson I have learned is that the rate of change tells us everything we need to know about the immediate future. When it accelerates, it tends to continue accelerating. When it decelerates, it tends to continue decelerating. And surprisingly, this tends to be the case no matter what metric we choose to examine.

The rally sputtered. And it’s all about interest rates.

Investors had been factoring in falling interest rates and a soft landing. But now, investors are increasingly expecting no landing and continued high rates. Recent strong economic numbers, along with higher-than-expected inflation, are changing the perception.

It looks like these high rates will stick around for a while. And most stocks don’t like high rates. But not all. There are some companies that actually thrive with higher interest rates. And that creates opportunity. In this issue, I highlight a stock that pays a massive dividend generated by these high interest rates. As income investors, we can reap the bounty.

Before we get into this week’s idea we need to clean up a couple of positions from April expiration last Friday. This is what we are going to do …

Sell FROG Stock
Sell HOOD Stock
Sell IOT Stock

Stepping back, we are closing our FROG and IOT positions for losses, while HOOD will be closed at its max profit.

With weeks of churning action and complacent sentiment, the market was flirting with trouble for a while, and now it’s hit the intermediate-term tripwire. Thus, we mostly advise defense here—after a big run-up and the aforementioned churning, the odds favor more short-term downside testing and/or pain ahead. That said, the odds also favor a resumption of the longer-term uptrend down the road, so it’s best not to get too holed up in your bunker, either. Tonight, we’ll leave our Market Monitor at a level 6, and the main message is to hold a good chunk of cash, honor stops and be very selective on the buy side.

This week’s list is another broad mix of stocks, with something for everyone in terms of stories, sectors and setups. Our Top Pick is a reliable grower in the infrastructure area that’s pulling back toward support. Given the market, keep new buys on the small side.

It’s been a painful April for stocks, with the S&P 500 down more than 5% and many growth and small-cap stocks down much further. But in the grand scheme, some selling was to be expected after five straight months of gains. It’s still a bull market, and it’s not likely to up and fizzle after five months. Eventually, selling pressures will ease, and the market will bounce back. Until then, we have to ride out the storm. Today, we do that in several ways: selling two more of our laggards, downgrading two once-red-hot stocks that are in the midst of steep corrections, and adding a new stock from perhaps the one strong sector at the moment: gold miners. It’s a new addition from Tyler Laundon in Cabot Early Opportunities.

There is no sugar-coating it, the market, led by the Nasdaq which has fallen for six straight trading sessions, had a bad week. By week’s end, the S&P 500 fell 4%, the Dow lost 1%, and the Nasdaq dropped 6.2%.

There is no sugar-coating it, the market, led by the Nasdaq which has fallen for six straight trading sessions, had a bad week. By week’s end, the S&P 500 fell 4%, the Dow lost 1%, and the Nasdaq dropped 6.2%.

The market has definitively changed character, with our Cabot Tides and Two-Second Indicator now negative—when combined with breakdowns among leading growth stocks, the odds favor more short-term weakness ahead. We’ve been holding some cash for a while and have boosted that this week, with 37% on the sideline, and we could raise more if the selling continues.

That said, we’re not aiming to hide out in our bunkers--following some short-term pain, the odds favor further long-term gains given the underlying trend and the lack of big-picture abnormal action out there. Thus, having taken partial profits in many names, we’re OK giving them a chance to find support, as some are likely to have another leg up after this downturn. In tonight’s issue, we’re moving a couple more stocks to Hold, hanging onto our cash and writing about many names that are taking the selling in stride and could have upside if the market finds its footing.

In the April Issue of Cabot Early Opportunities we take heed of the market’s recent volatility by digging into a wider-than-normal range of emerging opportunities.

We have gold mining, AI website development tools, healthy fast-casual dining and a few things in between!

As always, there should be something for everybody.

Risk off was the theme last week as traders are once again worried about sticky inflation, and now there is growing fear of further war in the Middle East. And while those are two big worries, big picture it wasn’t a terrible week for the indexes as the S&P 500 and Nasdaq both fell 1.6%, while the Dow lost 2.36%

After weeks of churning and choppy action, last week finally brought some “real” negative headlines that kicked the fear level up a few notches. As always, what’s more important to us is the market’s reaction to the news, and at this point, the intermediate-term advance is on the fence, with most indexes testing their 50-day lines and with more and more leaders doing the same. Big picture, it’s hardly a disaster, but we continue to be a little cautious, being selective on the buy side and holding some cash. We’ll pull down our Market Monitor to a level 6.

This week’s list has something for everyone, with growth, crypto, commodities and all types of potential setups. Our Top Pick is a smaller outfit with a great story—and it’s one of the few stocks that’s shown big-volume buying in recent days.

The economy is showing some mixed signals. But it certainly does not appear to be near a recession now. That could change. But it keeps not coming.


At the same time, the Fed is near the end of the rate hiking cycle. Sure, there’s speculation about another rate hike in the June meeting or the next one. But it is still close to the end of the hiking cycle. Inflation appears to be moderating (for now). Unless there is a big surprise with that number, the market can soon stop worrying about the Fed.

This week, we comment on earnings from Duluth Holdings (DLTH) and Macy’s (M).

We also include the Catalyst Report and a summary of the June edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

The technology sector is on fire. Before the market opened on Tuesday, the sector was up 5% for the past week, 15% for the last month, and 34% YTD. It’s also up more than 2% on Tuesday. What happened?


The outlook for many sector stocks greatly improved last Thursday. AI, or artificial intelligence, had been seen as a huge growth engine going forward as companies invest heavily in the technology. Those growth projections got a huge shot of adrenaline and the AI phenomenon got real when semiconductor company Nvidia (NVDA) reported earnings last week.

These days, AI, or artificial intelligence, is the buzzword du jour.

And it’s easy to understand why.

Play around with ChatGPT, and you will find it to be an incredibly helpful tool.

Longer-term subscribers are no doubt familiar with our immense patience with beleaguered discount retailer Big Lots (BIG). Its shares initially sagged due to bloated inventory, similar to other more highly regarded retailers like Target and Walmart, leading to our initial recommendation. We had expected that its earnings would be weakened as it offloaded its excess goods at sizeable discounts, but also that it would ultimately work its way out of its difficult but by no means impossible situation. At the time, Big Lots had a cash-heavy, nearly debt-free balance sheet, was generating positive free cash flow and traded at a depressed 3x EV/EBITDA multiple. What could go wrong?

Last week was a big week in the market. Game-changing news in the technology sector that significantly improves future earnings projections for many companies is causing the sector to soar.


AI or artificial intelligence had been seen as a huge growth engine going forward as companies invest heavily in the technology. Those growth projections got a huge shot of adrenaline and the AI phenomenon got real when semiconductor company Nvidia (NVDA) reported earnings and guidance that blew the doors off expectations because of much higher investment and spending in the technology than previously thought.

This week’s note includes our comments on earnings from Kohl’s (KSS). Macy’s (M) and Duluth Holdings’ (DLTH) report on June 1. Please note that the monthly edition of the Cabot Turnaround Letter will be published on Wednesday, May 31, and the Catalyst Report will be published on Friday, June 2.

WHAT TO DO NOW: Remain cautious but stay tuned. The market remains very narrow, with a few powerful stocks but the vast, vast majority of names either in no man’s land or acting poorly. For potential leaders, we see many that had been perking up before running into a wall this week—but not (yet) selling off abnormally. If these names can hold soon and resume their upmoves, we’ll like to add at least a couple (maybe more) to the Model Portfolio. Tonight, though, given the extreme narrowness of the advance, we’ll grit our teeth and sit tight, holding about three-quarters in cash and see if these potential leaders can get moving.

The market was looking pretty good through last week. Then this week, with no meaningful progress on the debt ceiling, momentum has deteriorated.


Yesterday afternoon U.S. House Speaker McCarthy was on a roll, saying that things are going a little better, that he won’t put a bill on the floor that spends more than last year and that the President is realizing he has to spend less.



JPMorgan says they put the odds of no debt ceiling deal by early June at around 25% and rising.

The Explorer had a good week with Butterfly (BFLY) up 15% and Solid Power (SLDP) up 10% this week. The S&P 500 has risen 8% in 2023 but the market gains are very narrow and concentrated, with the top five stocks accounting for most of the gains.

The market is near the highest level since last summer and up over 9% YTD. But it hasn’t made a sustained up or down move since the beginning of April.

It’s been more sideways action for most of the last week. The big obsession now is with the debt limit. No agreement has been reached and the crucial, as laid out by Treasury Secretary Janet Yellen, June 1 deadline is fast approaching. The market can’t seem to move higher until the issue is resolved. But it doesn’t really fall because investors expect the usual last-minute deal.

This week, I wanted to share a couple good charts to show why I continue to be bullish on energy stocks.

First, energy still represents a very small weight in the S&P 500.

Energy as a percentage of the S&P 500 reached as high as 16% in 2009. Today it’s under 5%.

With February 17 right around the corner and several of our positions with little to no premium left, I want to start the process of buying back our short calls and immediately selling more premium.

Inspire Medical (INSP) delivered yet another better-than-expected quarter after the closing bell yesterday as Q4 results came in near the high end of management’s pre-announced range.

Pinterest (PINS) reported Q4 results after the bell yesterday that were lighter than expected but don’t change the story of a company streamlining operations and tweaking the platform to drive modest user growth and, as a result, higher advertising revenue. Pinterest is also growing internationally.

I don’t love the action in Procept (PRCT) this week. While the broad market has been acting well and a lot of “risk on” stocks have gone up, shares of PRCT have headed south.

Today we are moving shares of Dow (DOW) from Buy to Sell. As the shares have reached our 60 price target, and with no compelling reason to raise that target, we are moving the shares from Buy to Sell. This change will also be made in the Cabot Turnaround Letter.

Moving Kraft Heinz (KHC) to Sell

I will be exiting the Starbucks (SBUX) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET today, February 3.

The FOMC met this week, and the meeting wrapped up with a 25bps hike, as expected. A subtle hint of what was to come (easy to point out in hindsight) was that the FOMC’s statement removed the reference to inflation being elevated due to supply and demand imbalances relating to the pandemic.

As discussed in our weekly issue, and on our weekly call, I will be taking a position in Starbucks (SBUX) today. SBUX is due to announce earnings after the closing bell today (February 2). The stock is currently trading for 110.83.

SPY continues to rally and has now pushed through our short 415 call strike. As a result, I am going to take off the trade. I will be following up this trade with a few opening trades as we need to start looking towards March expiration for premium-selling opportunities.

Well, I think we all knew the time would eventually come. We are going to close out of our February IWM iron condor as it has reached our stop-loss. This marks our first loss since August 11 and only our second since initiating the Quant Trader service back in early June. If you wish to hold, please be aware of the risks. Remember, trading is a marathon, not a sprint.

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.