The Fed’s latest hawkish stance prompted an upside breakout in Treasury rates and a big late-week selloff in the stock market, with just about everything getting whacked. That action puts to bed the rally attempt from late August, of course, and reinforces our overall stance—the intermediate-term trend remains down, and with the broadening of selling pressure, we’re pulling our Market Monitor down to a level 5. To be fair, though, we’re not sticking our head in the sand: Yes, there are many worries, but the longer-term trend is still up and there’s plenty of evidence suggesting a resumption of the post-bear rally is coming at some point. Even so, it’s best to wait to see the bulls arrive first than to catch falling knives—right now, we advise holding plenty of cash.

While there aren’t many super-strong stocks out there, this week’s list has many that have taken the selling in stride thus far. Our Top Pick is helping to lead a group move that got underway a few weeks ago and could be starting its first pullback—further weakness would be tempting.

So much for the market being boring! The Fed – with its “higher for longer” vow – broke up the recent monotony, albeit not in a good way. The S&P 500 has dipped to its lowest level since June, and growth stocks have had a rough go these last two months. But all signs point to a fourth-quarter bounce-back – new bull markets almost never up and fizzle within a matter of months. Knowing this, today we add a beaten-down biotech stock with plenty of upside, a recent recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

Volatility has, once again, made an appearance. However, as we have all seen over the past few months, sightings have been rare and, more annoyingly, fleeting. If volatility and in turn IV ranks are able to stay at current levels or potentially rise a little, we should begin to see opportunities pick up. I’ll continue to remain cautiously optimistic and patient until then.

All is well as we head towards the October 20, 2023, expiration cycle. Our BITO position is due to expire at the end of the week, and if all goes well, I intend to buy back our BITO calls, lock in profits and immediately sell more call premium. Otherwise, there isn’t much to do other than allow time decay to work its magic as we head closer and closer to the end of the October 20, 2023, expiration cycle. If our positions act accordingly, we have the opportunity to bring in 5% to 10% worth of call premium over the next 26 days.

Earnings are due to officially begin in just over two weeks with the big banks reporting. Until then, the market gods offer up the liveliest week of the earnings doldrums with several potential opportunities, most notably in COST (COST), Micron (MU) and Nike (NKE). I’ll take a closer look at a potential Costco trade In this week’s Trade Ideas section.

It was a somewhat ugly week for the market as the Federal Reserve continued to push its hawkish agenda and the bond market reacted violently. By week’s end the S&P 500 had lost 2.93%, the Dow had fallen 1.89%, and the Nasdaq had declined by 3.62%.

It was a somewhat ugly week for the market as the Federal Reserve continued to push its hawkish agenda and the bond market reacted violently. By week’s end the S&P 500 had lost 2.93%, the Dow had fallen 1.89%, and the Nasdaq had declined by 3.62%.

The market remains in a two-month correction, but as opposed to the sloppy action seen in recent weeks, the sellers are now starting to pounce, damaging even the resilient big-cap indexes. Longer-term, we still believe the next major move is likely to be up, but we can’t ignore what’s in front of us: We’ve been cautious for weeks, and earlier today on a special bulletin, we pared back on two of our current positions, which will leave us with a cash position in the low 50% range.

In tonight’s issue, we give you our latest thoughts on just about everything -- our stocks, the market, the big picture and interest rates, which, after two years, are still one of (if not the) key drivers of the market. There will be a sustained advance that comes out of all this, but we continue to think patience is the name of the game for now.

As part of our ongoing “Core & Explore” approach, today I present three new ETFs for your consideration. These three funds should help you weather the market’s many ups and downs these days. They are designed to remain both in the market and keep flexible to take advantage of new growth opportunities without going overboard.

In the September issue of Cabot Early Opportunities, we look into what this afternoon’s Federal Reserve meeting could mean for the market. Then we dig into five small-cap companies from the industrial, biotech, software and clean energy markets. There’s something for everybody.

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.

Stocks chopped up and then down last week, and all told, not much has changed—the market is still in the throes of a two-month correction, with a sideways-to-down intermediate-term trend and few stocks moving in a sustained way on the upside; simply put, there’s little money being made right now. That doesn’t mean we’re in the storm cellar—we’re OK having a few lines in the water and starting some small positions in potential leaders as the odds favor the next big market move being up. But overall, a cautious stance is warranted given the evidence. We’ll leave our Market Monitor at a level 6.

This week’s list has something for everyone, with a variety of sectors and setups represented. Our Top Pick is an old name, but it’s cheap, strong and has an AI infrastructure angle that should keep buyers interested. Try to buy on weakness.

It was a relatively quiet day on Wall Street, with the major indexes staying mostly range bound. At day’s end, the Dow up 19 points and the Nasdaq up 27 points

We had a one year old in 2013 and took a trip to Nevis, an island in the West Indies where my grandfather had retired in the 1980s.

Is this a bear market rally or a new bull market?

That’s the question investors are grappling with. Is this the end of the crummy market or is this 17% rally off the lows just a head fake? Let’s examine each possibility.

Over the past three years, special purpose acquisition companies, or SPACs, went from an obscure way for sketchy companies to become publicly traded to an extraordinarily trendy way for sketchy companies to become publicly traded.

It’s starting to feel like a bull market. But let’s not bank on it just yet.

Inflation is moderating, and many see an end to the Fed tightening cycle by early next year. The Fed part is probably true. The Central Bank will likely raise the Fed Funds rate to around 3.5% and then stop. Higher than that would probably plunge the country and the world into a deeper recession. I doubt this Fed will have the belly to do that.

As I touched on last week, the market has been on tear!
It’s unclear whether this is a “bear market rally” or the start of a new bull market.

In the last six weeks, metals and mining stocks have been on the comeback trail along with the broad equity market. Short-covering activity has unquestionably served as a major catalyst behind the recent gains in the metals, but now that much of those short positions have been covered, it’s time to ask the question many investors have been dreading, namely: “What—if anything—will fuel the next leg of the recovery?”

This note includes our review of earnings from Berkshire Hathaway (BRK/B), Elanco Animal Health (ELAN), ESAB Corporation (ESAB), TreeHouse Foods (THS), Viatris (VTRS), Vodafone (VOD) and ZimVie (ZIMV).

There were no ratings changes or price target changes this week.

Cactus (WHD) moves to sell today. After a quick trip to north of 60, shares of WHD have been somewhat volatile and downside risks seems to be creeping in as investors weigh the relatively high valuation and potential for slower ramp up of onshore U.S. production even in the face of soaring oil prices.

In my issue two weeks ago, the day before Russia invaded Ukraine, I told you that my favorite three cannabis stocks for buying (not that there was any hurry) were Cresco Labs (CRLBF) for its value and chart; Curaleaf (CURLF) for its size and speed of growth; and Verano (VRNOF) for its speed of growth and chart.



Those are still my favorites. Not much has changed. And while so many of the world’s economic connections have been affected by the actions in Ukraine, the elements of the U.S. cannabis economy, which is heavily domestic, seem fairly immune.

Procept Biorobotics (PRCT) reported official Q4 results this morning (preliminary results came out on January 11). Revenue of $10.1 million (up 216%) was at the high end of the preliminary range, as was full-year revenue (up 347% to $34.5 million).

The market was down earlier today but, after testing the January lows yet again, the major indexes are perking up somewhat, with the Dow up 440 points and the Nasdaq up 230.

Today, we are recommending an Indian ETF whose five largest holdings are: Reliance Industries Ltd Shs Dematerialised (RELIANCE.B, 9.07% of assets); Infosys Ltd (INFY.BO, 8.58%); Housing Development Finance Corp Ltd (HDFC.BO, 6.54%); (ICICI Bank Ltd (ICICIBANK. 5.46%); and Tata Consultancy Services Ltd (TCS.BO, 4.58%). We are also taking profits in a previous idea.

This railroad is expected to grow earnings by 17% next year. The company has a current annual dividend yield of 1.93%, paid quarterly.

In the past 30 days, five analysts have boosted their EPS forecasts for this skilled nursing facility owner.

As you are aware from the prior issue and the last update, the Undiscovered Portfolio is tactical in nature, meaning that we’ll be buying and selling funds on a fairly regular basis, as market conditions change.

Our new recommendation is a bus/heavy duty truck transmission company that has a current annual dividend yield of 1.95%, paid quarterly. We are also selling three previous ideas.

This insurance company beat analysts’ earnings estimates by $0.49 last quarter, and six analysts have recently boosted their EPS forecasts for the company.

Inflation, Russia’s invasion of Ukraine, and rising rates are pushing up commodity stocks this this miner.

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.