Last week’s “big” market-moving events (Federal Reserve and Jobs Report) brought further selling as the S&P 500 fell 3.25%, the Dow lost 2.25%, and the Nasdaq dropped 5.88%.

Last week’s “big” market-moving events (Federal Reserve and Jobs Report) brought further selling as the S&P 500 fell 3.25%, the Dow lost 2.25%, and the Nasdaq dropped 5.88%.

One of our stocks surprised markets on the downside with poor third-quarter numbers while two others were up 15% and 16%. Crypto hit heavy turbulence as the stock market slipped rather than soared on the midterm election results of an underwhelming GOP wave, uncertainty, and expected gridlock over the next two years. Elsewhere, the United Nations projects that next week, the world’s population will exceed 8 billion, and this leads to a new Explorer, recession-resistant, agribusiness idea this week.

The market had a nice run in October, with the Dow Jones Industrial Average gaining 14% for the month.

The economy continues to look pretty good, with manufacturing steady, construction spending up, and employment still healthy, despite a 200-basis point increase in the unemployment rate, now 3.7%.

The Federal Reserve once again boosted the Fed Funds rate by 0.75% this month, which the markets had already built in. Right now, it looks like Fed Chair Jerome Powell may target rates even higher than the 4.5-4.75% initially projected, but the rate increases might come in smaller doses.

The Fed has raised the Fed Funds rate six times this year to combat inflation and the last four times at a 0.75% clip. The current 4% rate is the highest in well over a decade. But inflation hasn’t budged even after the rate hikes, a shrinking GDP, and a bear market.

At the November meeting, the Fed Chairmen stated that the previous 4.5% to 5.0% Fed Funds goal no longer applies. It will have to go higher. The U.S. economy is resilient, but it will eventually give way to the forces aligned against it. It is almost certain that there will be a recession in 2023.

Meanwhile, for the first time since forever, you can get investment-grade, fixed-rate investments that pay 5% or even 6%, for now. But recessions put downward pressure on longer interest rates as loan demand dries up.

In this issue, I highlight a rare opportunity to lock in a high fixed rate while it lasts and add balance and diversification to the portfolio. Let’s not miss it.

Today, I’m recommending a financial that is taking advantage of a special opportunity that is only available to small community banks.

Key points:

• Due to a special program (Emergency Capital Investment Program), earnings are expected to grow by 250% over the next three years.
• Cheap valuation. Stock trades at current P/E multiple of 13.2x.
• Downside is limited given high cash levels on bank balance sheet.

All the details are inside this month’s Issue. Enjoy!

Last week’s “big” market-moving events (Federal Reserve and Jobs Report) brought further selling as the S&P 500 fell 3.25%, the Dow lost 2.25%, and the Nasdaq dropped 5.88%.

It’s an extremely pivotal week for stocks, as the midterm elections and latest round of inflation data could go a long way toward determining how markets will finish out this difficult year. In the meantime, we’re adding the rare growth stock that has held up well amidst all the ups and downs of late, which should bode well for the coming months. It’s a retail favorite of Cabot Growth Investor Chief Analyst Mike Cintolo – and thus may look familiar to some of you.

Details inside.

The major indexes quickly retreated after the prior couple of good weeks, with growth-oriented areas falling the most, a lot of stocks being rejected near resistance and some old winners being taken out and shot. Despite that, there are some green shoots out there—by the letter of the law, some broad indexes (like small- and mid-caps) are in intermediate-term uptrends, and we’re also seeing some sectors assert themselves, especially in the commodity space. We’re not bullish, and will leave our Market Monitor at a level 4, though our overall advice remains basically unchanged: Hold plenty of cash, honor your stops and, if you do some buying, keep it small.


This week’s list is again heavy on commodity-type names, though we’re also seeing a few recent earnings winners that have some growth to them. Our Top Pick straddles the line between growth and commodity and is one of the few names to move out to recently all-time highs.

It was another good week for our positions. And now it’s time to finally add a few more positions to the mix. I plan on adding two new positions this week: one to the Income Wheel Portfolio, the other will be a short-term trade with roughly 45-60 days until expiration. There are several good opportunities from our weekly watch list that I’ll be sifting through with the intent to add something mid-week, after the elections have passed.

Last week, prior to the Fed announcement, I decided to close out our two remaining positions for the November expiration cycle. While, in hindsight, holding on through the event would have been the best path for maximizing profits, we did manage to lock in two small gains.

The returns makes it 14 profitable trades out of 15 for a cumulative return of 71.3% since starting Quant Trader back in the beginning of June. Not bad given the wildly volatile market we’ve experienced over the past five months.

This week we will ramp back up opening new positions, this time for the December expiration cycle. I want to stay flat until the elections are over but intend on adding at least three new positions over the next week or so. Stay tuned!

The upcoming week of earnings is a fairly slow one, with only a few real choices on the docket. Disney (DIS) is definitely the highlight of the week and the one I will be focusing on.

However, the following week we see lots of the big boys due to report, including Walmart (WMT), Home Depot (HD), Lowe’s (LOW), Target (TGT), Cisco Systems (CSCO) and several others. As I stated in the last webinar, I expect to see at least three, if not more, trades that week as earnings season slows down significantly afterwards.

As for this past week, we were able to get out for a small 2.7% loss in SBUX. So far this earnings season, we are averaging a one-day return of roughly 4% per trade, or what has been 4% per week for this earnings cycle. Certainly nothing to write home about, but respectable nonetheless given the overall performance of the market. I anticipate that we will make at least four more trades, if not more, before the earnings cycle slows down in two weeks.

The market has been doing OK, though it’s more about addition by subtraction—the fact that growth stocks have avoided any major selling wave after the recent upmove is a plus, but we’re still seeing lots of selling on strength and rotational action that changes by the day.

Small caps and growth stocks continue to look better for the third consecutive week. This is a welcome trend given that the beginning of May was pretty tough.

The overall market has topped out in the last month. But many of the slower-moving and more value-oriented stocks didn’t get the memo.

The market seems to have settled into complacency. We’re in a period after first-quarter earnings reports and government statistics indicate a surging economy, yet investors rightfully wonder if or when the Fed will raise interest rates and are starting to consider what happens after the post-pandemic boom.

Today’s note includes earnings updates, ratings changes and the podcast.

The market seems to have found its footing this week as the economy reopens amidst some supply shortages and inflationary pressures. Electric vehicle stocks are coming back as Ford announced a big push into EVs and its new F-150 Lightning received 70,000 deposits in just 10 days.

The market continues to stumble sideways. On the one hand, the S&P 500 is within a whisker of the all-time high. On the other hand, stocks have been going sideways for about a month.

My favorite market strategist, Ryan Detrick, is always good for some interesting factoids. According to Ryan, when the S&P 500 is up >10% through the first 100 days of the year, it increases 8.6% on average during the remaining portion of the year.

The market continues to forge nowhere. The S&P 500 is still below the May 7th high, but it’s only less than 1% below the high. It stopped going up. But it isn’t going down.

More than any single factor, broad-based fear is keeping gold prices elevated (with silver benefiting by extension). As we talked about in the previous report, gold’s “fear factor” has returned with a vengeance as inflation concerns—combined with other economic worries and geopolitical unrest—have converged to give gold a strong supporting bid as we head closer to summer.

The market was mixed today with cyclical stocks outperforming—at day’s end, the Dow was up 139 points while the Nasdaq was down 2 points.

Well, it’s about time some buyers showed up. While we can’t yet characterize the move in higher growth small- and mid-cap stocks as a rally per se, it’s not premature to say that sentiment has turned up when it comes to these types of stocks.

Hedge funds are diving into this e-commerce company’s shares; their interest is at an all-time high.

This preferred stock has above average yields, and is issued by an insurance company that beat quarterly earnings estimates by almost 11%.

We are moving Volkswagen AG (VWAGY) to a SELL.

The good news is that one of our stocks, Trulieve (TCNNF), closed at a record high yesterday. The bad news is that none of our other stocks did. The sector as a whole remains in the moderate correction that began five weeks ago, and I continue to think that we are likely to see lower prices in the near future.

This home goods retailer is getting ready to launch eight new private-label brands. The stock is showing good momentum, as investors applaud this news.

It’s been a week or so of comparatively calm market action, which has given us a chance to evaluate how our current roster of stocks is behaving. With that evidence, and a new batch of stocks coming tomorrow in the March Issue, we’re going to step aside from a few of our weaker performing positions today.

This mining company beat analysts’ estimates by $0.04 last quarter, earning $0.18 per share.

This lumber company reported fourth quarter earnings of $366 million on sales of $1.689 billion, and recently completed its acquisition of Norbord, Inc.

The shares of this pizza franchiser were just upgraded at RBC Capital to ‘Outperform.’

A new CEO is driving this insurance company to higher profits. The shares have a current dividend yield of 3.15%, paid semi-annually.

Three days does not make a trend in any way, shape or form. But, rejuvenated by a stalling/pullback in yields, growth stock bulls have pulled themselves up off the mat and appear ready to defend their turf – at least for now.

With so much going on in the market I wanted to share some of what’s running through my head today, then keep tomorrow’s Weekly Update focused mostly on stock updates.

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.