The close of the month of February, which was extremely volatile day-to-day, was another week in the red as a mix of AI-driven growth fears and geopolitical tension put pressure on broader markets. Traders sold heavily into tech and financials, keeping sentiment cautious. By week’s end, the S&P 500 had slid 0.4%, the Dow had lost 1.3%, the Nasdaq had declined by 1% and the Russell 2000 had fallen by 1.2%.

The major indexes and most stocks were hit fairly hard at the open today, though, as the day wore on the losses become minor and many stocks were actually green. Is that encouraging? You bet, especially as the big-cap indexes held support right near recent lows. That said, does it change the intermediate-term evidence at all? Not really, with the themes of the past few weeks (pockets of strength, but choppy action and some yellow flags) still with us. We’ll leave our Market Monitor at a level 6 and remain flexible.

This week’s list has something for everyone, with some cyclical plays, growth titles and a few recent breakouts. Our Top Pick is a mid-sized outfit with accelerating growth as its chips ride the AI (and other fast growing) waves.

The U.S.’s involvement in renewed conflict in the Middle East has so far done little to deter this market, despite some modest selling early Monday. That said, risk is decidedly elevated, with many growth stocks still well below their highs and the all-important VIX climbing above the 20 level today. But oil prices are on the rise too, and that means it’s a good time to capitalize in the form of a mid-cap energy play recommended by Tyler Laundon to his Cabot Early Opportunities audience last month.

Details inside.

The close of the month of February, which was extremely volatile day-to-day, was another week in the red as a mix of AI-driven growth fears and geopolitical tension put pressure on broader markets. Traders sold heavily into tech and financials, keeping sentiment cautious. By week’s end the S&P 500 had slid 0.4%, the Dow had lost 1.3%, the Nasdaq had declined by 1% and the Russell 2000 had fallen by 1.2%.

The close of the month of February, which was extremely volatile day-to-day, was another week in the red as a mix of AI-driven growth fears and geopolitical tension put pressure on broader markets. Traders sold heavily into tech and financials, keeping sentiment cautious. By week’s end the S&P 500 had slid 0.4%, the Dow had lost 1.3%, the Nasdaq had declined by 1% and the Russell 2000 had fallen by 1.2%.

Let’s start with some remarkable statistics.

Nvidia’s (NVDA) fourth-quarter revenue reported yesterday was $68 billion, up 73% from the same period last year. It now makes more revenue in a single quarter than most chip competitors generate in an entire year. Nvidia’s profit for the last 12 months was $120 billion. Just three years ago, Nvidia’s profit was $4.4 billion.

It is estimated that more than one-third of the value of the stock market is represented by companies based in the San Francisco Bay/Silicon Valley area.

We continue to get solid signals from the White House that cannabis rescheduling is on track. That’ll be a significant catalyst for cannabis stocks. The only question is the timing. That remains uncertain and probably unknowable. Cannabis stocks remain a buy on weakness ahead of this catalyst.

The background here is that last December, President Donald Trump signed an executive order directing the Justice Department to move cannabis to Schedule III from Schedule I under the Controlled Substances Act.

The bull market has broadened out beyond technology in a big way. While the S&P 500 is about even for the year so far, most market sectors are beating the index, and by a lot. In fact, six of the eleven sectors have a better than 8% YTD return, not even two months into the year.

The new market dynamic is having a profound impact on the portfolio. Several stocks that had been dead weight in the portfolio have soared in recent months to 52-week highs. The new market has turned previously underperforming stocks into strong income generators.

It has been a strong run for several portfolio stocks. But a largely successful earnings season is almost over. That means there will be no obvious catalyst to continue driving stocks higher, at least for now. The situation makes it a better time to capitalize on recent price surges instead of adding more positions and hoping for more.

Under the current circumstances, the biggest market opportunity right now is income. In this issue, I highlight three more high-priced covered calls on stocks that have had strong rallies.

In researching potential candidates for this month’s edition of the newsletter, I narrowed down my final list of top choices to the usual 10 stocks. What caught my attention when reviewing the list, however, was how many of them were in the healthcare sector—in particular, the therapeutic arena.

I was gratified by this discovery since I feel that a.) medical stocks are underrepresented in the portfolio, and b.) the sector is at once defensive in nature (always a good thing in my estimation) yet also poised to benefit from ongoing sector rotation.

Before we dive into this week’s covered call idea, I need to address two items.

First, we are going to sell our RKT stock as the February call that we sold expired worthless, leaving us with our stock position.

It remains about as mixed an environment as we can remember, which does mean the risk of some sort of convulsion (a correction, a re-rotation into laggards, etc.) is elevated. That said, as opposed to the on-again, off-again action from certain areas in January, we have seen the winners persist of late, so that’s where we’re focusing—while also holding some cash and raising stops along the way given what’s going on. For the moment, we’ll stick with a level 6 on the Market Monitor, but again, we’re OK taking swings at strong stocks.

This week’s list is very heavy on the cyclical side of things, with many names perking up and out of long ranges. Our Top Pick has a solid growth profile and has emerged on the upside after a six-month choppy phase.

Tariffs rejected. Big shortfall in GDP growth. Possible emerging conflict with Iran. There were enough headlines last week – and really, Friday alone! – to make your head spin. And yet … stocks were mostly calm, with no sudden movements in either direction. As always, the stock charts matter more than the headlines, at least when it comes to investing.

So, let’s stay the course, which this week means adding a well-known stock that continues to thrive in the midst of the ongoing travel resurgence. It was Mike Cintolo’s Top Pick in his Cabot Top Ten Trader momentum-trading advisory last week.

Details inside.

Technology is getting a comeuppance. But other sectors are getting a boost.

The artificial intelligence trade was under pressure last month. But it recovered over the last three weeks. The back and forth has again taken a negative turn after AI bellwethers Oracle (ORCL) and Broadcom (AVGO) reported earnings that didn’t impress investors.

It’s no secret that a conspicuous presence of activist investors in an ailing company has proven to be one of the most powerful, and reliable, catalysts for a successful turnaround. For that reason, I’m always on the lookout for companies that have recently become the target of activism.

But if the Trump Administration gets its way, the activist investor catalyst could soon be of diminished importance.

This week was all about the Fed. But those of us watching small caps noticed some major news too – the S&P 600 has broken out to its highest level in just over a year.

The catalyst was the Fed’s fully expected 25 bps cut yesterday. It was less of a hawkish cut than expected and included a commitment to buy $40 billion in short-term Treasuries to ease money-market strains that emerged after halting balance-sheet runoff.

Prior to that announcement, the index was toying with a breakout, but afterward it shot up and closed 2.4% higher on the day.

As expected, the Fed cut interest rates for the third time this year on Wednesday, but officials remain divided over the future and signaled that cuts next year are likely to be limited.

Two Explorer stocks stand out. Those are Banco Santander (SAN), up 153% so far this year so I recommend taking partial profits if you have not already done so. And there’s Coeur Mining (CDE), whose shares that are now up 179% so far in 2025.

The law of averages is a powerful thing … especially when it comes to investing.

Stocks and sectors that outperform for an extended period of time often regress to the mean, sometimes violently, when people least expect it. On the flip side, stocks and sectors that have underperformed for months or even years start to get noticed by bargain hunters and play catch-up, even if it’s a bit more gradual.

Circle December 15 on your calendar. That’s the day the Supreme Court will likely let us know whether it decides to hear a major cannabis lawsuit. If it says yes, cannabis stocks will rally hard. Cannabis stocks may well even rally in the run-up to that date.

The suit challenges federal jurisdiction over cannabis in states where it is legal. We still won’t know the final outcome if the court decides to take up the case. So, any rally might be sellable for very short-term traders. Personally, I will continue to hold through, because the timing of any rescheduling news is uncertain.

The market is close to the high, and all eyes are on the Fed.

The market has priced in a 0.25% fed funds rate cut already. It could get ugly if the Fed doesn’t cut the rate on Wednesday. But that is unlikely. The rally in interest rate-sensitive stocks took place over the past few weeks. Now, those stocks are pulling back as investors fret over what the Chairman might say about future rate cuts in the minutes following the rate cut announcement.

It’s that time of the year when economists and market mavens spill an abundance of ink making year-ahead stock forecasts and boom/bust warnings. As there seems to be an abnormal amount of recession predictions for the year ahead—including a few from some reputable sources—I think we should examine the question: Will the U.S. witness a major economic shock in 2026?

WHAT TO DO NOW: The evidence has improved of late, though we haven’t seen many decisive green lights from our indicators. Still, with so much cash, we’ll dip a couple of toes in tonight and then follow up … if the good vibes continue. Tonight, we’ll add half-sized positions (5% of the account) in Eli Lilly (LLY) and JFrog (FROG), leaving us with a still-big 55% cash hoard. Details below.

The resilient market forges on. After the biggest market dip since April in the middle of last month, the S&P has gained it all back in the last couple of weeks.

Stocks weakened last month as investors worried that tech stock valuations were too high, as the artificial intelligence trade may be overdone. They also worried that the Fed would not cut rates in December. But stocks were rejuvenated after some positive statements by Fed members greatly increased the odds of a December fed funds rate cut.

This is one confusing market. It’s doom and gloom one day and then optimism the next. Investors can’t seem to make up their minds about whether the world is going to Hell in a handbag or it’s time to buy. What’s going on?

Last week was confounding to say the least. Two events promised to address the market’s chief concerns: the sustainability of the AI trade and the state of the economy. Last week’s earnings report from the ultimate AI bellwether Nvidia (NVDA) and the long-awaited jobs numbers could answer both questions. Both the earnings report and the jobs report were everything investors could have hoped for. Stocks tanked anyway.

We’re going to make a couple of moves today ahead of tomorrow’s Fed meeting and the publishing of the September Issue of Cabot Early Opportunities.

Sell Dynatrace (DT) and Waystar (WAY)

My August pick, Argan (AGX), has become one of the core ways for small-cap investors to play the AI data center, natural gas power and electrification of everything themes. The company grew revenue by 50% last year. As such, expectations from Argan have been high, despite management’s continued conservativism given the current year growth rate will be slower (around 10%) than last year before ramping up again in FY27.

Shares of Byrna (BYRN) are trading modestly higher this morning after the company released preliminary revenue results for Q3.

Credo Tech (CRDO) up 10% on Earnings

WHAT TO DO NOW: The weakening of growth stocks that’s been going on for weeks has resulted in all-out selling this week—we came in with 43% in cash, which has helped, but today we’re selling the rest of our Palantir (PLTR) and Rubrik (RBRK) stakes, leaving us with a large 57% on the sideline. Details below.

With a slew of fresh ideas coming in tomorrow’s August Issue and a portfolio that may soon have too many ideas to stay on top of, I’m trimming one position today.

Sell a Quarter Position in Intel (INTC)

Most of our cannabis companies reported earnings in the past week.

Here are some of the key sector insights, followed by company updates.

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.

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.