It was another rough week for the bulls as the bond market and China worries continue to weigh on the indexes. By week’s end the S&P 500 and Dow had both lost 2.22%, while the Nasdaq declined by 2.6%.

It was another rough week for the bulls as the bond market and China worries continue to weigh on the indexes. By week’s end the S&P 500 and Dow had both lost 2.22%, while the Nasdaq declined by 2.6%.

In the August Issue of Cabot Early Opportunities, we talk about what happened to the summer stock rally and dig into five companies selling everything from coffee to sporting goods to mobile advertising tools.

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.

The market’s nascent downturn remains in effect, with the short-term trend of most indexes and sectors pointed down and with growth stocks bringing up the rear (though today was a good first step to reverse that). Even so, the pullback from a top-down perspective continues to look normal, so we’re not hiding in our storm cellar, either—we’re hanging onto our resilient, profitable stocks while nibbling here or there on high-odds opportunities. We’ll leave our Market Monitor at a level 6 today.

One of the more encouraging things of the past three weeks is that we’re not having trouble finding good-potential names with solid charts, and this week’s list is no different. Our Top Pick is a great growth story and now, after a couple of bad years, all of the firm’s metrics are pointed in the right direction.

August has been a slog for investors, as an uneven earnings season has given the sellers the full buckets they needed to throw a bit of cold water on the 2023 bull market. While high-flying growth stocks have certainly taken it on the chin, especially on earnings, the overall market pullback has been fairly modest, and probably healthy in the long run. With prices lower than they were in July, particularly among growth stocks, today we add a big name with a revolutionary product that many people already use regularly – though only about half the country has access to it. That will soon change, which is why Cabot Growth Investor’s Mike Cintolo is high on it.

The market rally in 2023 and recent pullback have left the All-Weather portfolio up a respectable 8.5%, with the Vanguard Total Stock Market ETF (VTI) continuing to do the heavy lifting, up 27.5%.

Nothing has changed from last expiration cycle, both bond funds (TLT and IEF) and the commodity fund (DBC) continue to lag behind, but that is the yin-yang protective nature of the All-Weather portfolio just doing its job. That being said, all of our positions are outperforming their respective ETF benchmarks, once again showing the power of using a poor man’s covered call approach.

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 market has moved off the lows of last month. But stocks really aren’t going anywhere.
The problem is recession. An increasing number of economists are calling for a recession in the next year as the Fed aggressively raises rates and pulls back stimulus in an effort to tame this high and persistent inflation. Stocks are already at least partially pricing in a recession that may not even happen.

The first half results are in. The S&P 500 has had the worst first half since 1970. Not good.
All year long the market has grappled with the strong possibility that the Fed will have to induce a recession in order to tame the high and persistent inflation. There had been hope that a recession might be avoided. But recent evidence is indicating the recession scenario.

Not surprisingly with the holiday weekend, last week was a quiet week. And I bet this week will be quiet too.
But we did get some good news!

A rough second quarter came to an end last week. I would call this a “Nickels and Dimes” market; you make a nickel when the market goes up, and before you know it, you have lost dimes since the market goes down so fast. But that doesn’t mean you have to give up on your opportunity to profit.

The ProShares Short Bitcoin ETF (BITI) launched on Tuesday, June 21. This is the first ETF of its kind launched in U.S. markets, catering to investors (and bears) who are looking to hedge their cryptocurrency holdings. As active investors here at Cabot, we believe the launch of this product to be a compelling way for our readers to profit from short-term declines in cryptocurrency markets and offers a new way to hedge our long portfolio.

Weakness persists in most metals—and commodities in general—as investors continue to worry about the heightened risk of another recession. Despite the bad news, however, there are some promising areas of strength which we’ll discuss here.

Before we do, let’s start with the areas we’ve been avoiding. Industrial metals like copper, steel and aluminum just made fresh lows last week, with the former hitting its lowest level since 2020. “Dr. Copper,” the metal with a PhD. in economics, is especially worthy of mention.

This week’s Friday Update includes a summary of the recent Cabot Turnaround Letter and comments on earnings from Walgreens Boots Alliance (WBA). There were no ratings changes. We also summarize the podcast and include The Catalyst Report.

There are a lot of negatives out there these days. The AAII Sentiment Survey shows optimism is in the tank while pessimism is through the roof.

Explorer stocks held their ground this week as we move two positions to a hold. Don’t be too discouraged. S&P 500 stocks struggled in the first half of this year, roughly equal to that of 1970. That year the S&P 500 fell 21% in the first half and then gained 27% in the second half. Let’s hope 2022 follows a similar pattern.

This market has recovered nicely after plunging into bear market territory and beyond the week before last. Unfortunately, the good times probably won’t last.
All year long the market has bounced to some sort of recovery after plunging to new lows. But stocks can’t seem to muster any lasting traction with rising interest rates, high inflation, and a souring economy. Those things are simply too much of a bummer to whistle past.

The market remains in a bearish posture, with a number of technical signals suggesting the move downward isn’t done yet. Greentech is below its 20-day and 40-day moving averages, which are downtrending, meeting our definition of bearish and there remains a well-defined downtrend line in the broad market and Greentech. That said, we’re above the lows of May, which in itself is a sign the market may be working its way toward a turnaround.

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.

In the past 30 days, four analysts have raised their EPS estimates for this Real Estate Investment Trust. The shares have a current annual dividend yield of 2.72%, paid quarterly.

In a recent update, I used the phrase, “It’s always darkest before the dawn,” as I reasoned that the marijuana sector’s dreadful performance in 2021 was likely the prelude to a well-deserved rebound in 2022. And the news is still pretty dark.

This eco-friendly water management company is expected to post annual earnings growth of 49.5% over the next five years.

Analysts expect this money remittance company to grow earnings by more than 20% next year.

The market meltdown is continuing today, and while it’s being led by growth stocks, the selling is spreading out to every nook and cranny of the market—as of 12:30 eastern, the Dow is down 511 points while the Nasdaq is cratering another 350 points.

This global electrical equipment maker is expected to grow earnings by more than 14% annually, over the next five years. It pays a current dividend yield of 2.28%, paid annually.

The market started out lower this morning after a worse-than-expected jobs report. As of 11:30 am, the Dow is down just 14 points, but the Nasdaq is off 130 points and growth-oriented indexes are down another 1% to 2%.

This Top Pick is a perennial investor favorite, especially for the annual dividend of 7.50%, which is paid quarterly.

ESS Tech (GWH) closed below our sell-stop yesterday and isn’t bouncing today. We recommend selling.

This travel-focused tech company just separated its CEO and President roles to help strengthen the company in preparation for the winding down of the pandemic. The company’s earnings are forecast to grow by more than 70% next year.

Growth stocks are continuing on their path lower so far today while some cyclical stocks perk up—as of 12:15 EST, the Dow is up 115 points but the Nasdaq is down 155 points and most growth stocks are off much more than that.

The shares of this gold miner are now in 33 hedge funds’ portfolio. The shares have a current annual dividend yield of 2.63%, paid quarterly.

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.