Explorer stocks held up pretty well during this turbulent week as almost all were steady or up, with Chile’s SQM up five points. Stocks stabilized yesterday after a sharp pullback on Tuesday. While prices of gasoline are down, prices of most of other things like food, rent, and medical care are still rising. This week we dive into semiconductor stocks with a return to Taiwan for a new recommendation.

The market has continued its volatility since mid-August, rising above 34,000 on the DJIA, then contracting, just to bolt upward again at the end of last week. Economic uncertainty and fears of a recession, although recently economists have been decreasing their likelihood for a 2022 recession, effectively pushing that into 2023.

The unemployment rate for August unexpectedly rose to 3.7%, but unemployment claims in the past week were less than forecast. It’s still a great market for folks looking for jobs.



We’ll have new housing stats next week, but anecdotally, I can tell you that prices are still being reduced in my region, but sales activity has increased, after about a six-week lull.

It’s been a rough year for stocks. And things may get worse before they get better. Meanwhile, money markets pay barely anything, and you never know when the market will turn.
Dividends are a great answer for a market like this.


They provide an income and lower volatility in turbulent markets and make it easier to stay invested ahead of the next bull market. Dividends account for most of the market returns during flat and down markets and excel during times of inflation.


In this issue, I highlight a company in one of the most defensive and recession-resistant industries on the market that currently pays a massive 8% yield. The stock is already cheap and likely near the trough of its own bear market with far more upside than downside over time to complement the high dividend.

Today, I’m recommending a company that’s benefiting from “green” initiatives.
Key points:

• •27% revenue growth last year, and 17% expected growth for the next 5 years.•256% EPS growth last year.•A strong balance sheet with net cash.•High insider ownership.

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

It’s a good news/bad news situation for most metals, as shutdowns across Europe, Asia and South America due to power shortages and other factors are contributing to lower supplies for several industrial metals. However, signs that inflation may be in the process of reversing bodes ill for the intermediate-term outlook.

Uranium, meanwhile, is now in the driver’s seat as the global energy crisis supports the renewal of nuclear power initiatives.



In the trading portfolio, no new positions are recommended for now as the broad metals market is still unsettled.

Coming off three straight weeks of losses, the bulls staged a rebound last week as the S&P 500 gained 3.65%, the Dow rose 2.66% and the Nasdaq rebounded by 4.1%. Though of note, the market is down across the board this morning following a “hot” inflation report. The expiration of our September covered calls is this Friday. Expect to hear from me Thursday afternoon or Friday morning on how we will manage these positions.

Coming off three straight weeks of losses, the bulls staged a rebound last week as the S&P 500 gained 3.65%, the Dow rose 2.66% and the Nasdaq rebounded by 4.1%.

Coming off three straight weeks of losses, the bulls staged a rebound last week as the S&P 500 gained 3.65%, the Dow rose 2.66% and the Nasdaq rebounded by 4.1%.

Within the last two weeks we’ve been able to lock in four straight winning trades which has increased our win ratio to 90% (9 out 10 winning trades). This should be of no surprise given we’ve been placing trades with a better than 85% probability of success. Hopefully the numbers will continue to play out as the probabilities intend, but sequence risk will rear its head from time to time as we continue to pile on the trades. So with that in mind, keep your emotions in check, stay disciplined in your approach and keep your position size at reasonable levels. I’ll discuss this further, in addition to our current positions, trade ideas and more in our upcoming monthly webinar.

The bulls came out swinging after Labor Day, putting at least a brief half to all the late-summer selling. Whether the mini-rally lasts another week (or longer) may depend on the new inflation data, due out tomorrow morning before the opening bell. For now, the bear market remains, but it was a good week for stocks – and an even better week for the Stock of the Week portfolio, with several of our stocks up double-digit percentages since we last spoke. And today we add a new stock that’s poised to lead the next true market rally – whenever it arrives – but in the meantime is faring quite well in its own specific niche.

Details inside.

At the close of the August expiration cycle, back on the 19^th, the SPDR S&P 500 ETF (SPY) was trading for 422.14. Now it’s trading 3.7% lower at 406.60.

For the year the S&P 500 (SPY) is down 14.7%, while the tech-heavy Nasdaq 100 (QQQ) and small-cap Russell 2000 (IWM) indexes are lower by 22.8% and 15.7%, respectively.



Nothing has changed from last month’s issue. I still expect to see bouts of volatility going forward. I would like to say that most of the weakness is behind us, but unfortunately, I don’t have a crystal ball. Although, I will say that barring any real setbacks in inflation data or ongoing geopolitical concerns, I expect the market to hold the 2022 lows and potentially rally, particularly if inflation data subsides.

The portfolio continues to do well in what has been a very difficult market for most traders and their respective portfolios. While I would love to have more trades on, I’m perfectly fine keeping our level at five open trades per expiration cycle with the understanding that as opportunities arise, I will add more. But with a widely vacillating market and a host of bearish crosscurrents I plan on maintaining a fairly conservative approach. That being said, I also plan to add a hedging position to the mix for those that want a little portfolio insurance just in case the market pushes sharply lower. This will also allow us to add a few shorter-term trades to the mix.

With the stock market regularly surging to record highs, it may seem like an unusual time to focus on valuation. After all, many stocks are remarkably expensive on traditional measures, and even somewhat lofty on non-traditional measures. But valuation still matters, especially if the market loses its current luster (assuming that is even possible)!

The market continues to perform incredibly well with the S&P 500 at an all-time high. And there continues to be signs of froth. The latest data point that I’ve found is the average SPAC is trading at a 26.4% premium to its cash value.

While the rest of the year looks very good for the market, a pullback is likely, if not inevitable, in the weeks and months ahead.

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

Suffice to say we are in a bull market. Areas of it are most definitely frothy. But stepping back and thinking about where we are in a bigger cycle I continue to feel as though we are entering a more sustained economic recovery and (hopefully) sustained market run-up broadly similar to what happened coming out of other major shocks, like the dot-com bubble and Great Financial Crisis.

While the market continues to move forward, The “Buffett Indicator,” which takes the broadest Wilshire 5000 Index and divides it by the annual U.S. GDP, is now at a record high. In doing the math, the Buffett Indicator stands at about 194%. This figure is well above the 159% seen just before the dot-com bubble.

This market looks like it never wants to stop going higher. The S&P 500 just made yet another in a long series of new all-time highs.

Last week, we outlined four ingredients of a market bubble that were usefully outlined in a recently published book1”and briefly described how it clearly appears that our stock market is in a bubble. These ingredients include easy trading of assets, cheap and easy money, rising speculative fervor and an appealing narrative.

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

The quick rebound in the major indexes and many growth stocks this week has been very encouraging—it doesn’t completely clear the air from some of the abnormal action last week, but it’s definitely a plus. We remain mostly bullish, though we continue to pick entries carefully, especially with so many stocks reporting earnings in the next couple of weeks.

The fourth quarter earnings season is well under way and the results have been somewhat spectacular so far, and much better than expected.

What a wild week! Even though I’m not long or short GameStop (GME), it was hard to take my eyes off its stock over the past week. There are a lot of different takes on what it all means. Some believe it’s a sign of reckless behavior and a signal that the market must be near a top.

What a market! Despite all the noise out there our portfolio’s performance continues to exceed expectations. Our average gain across 30 positions is hovering between 80% and 85% as I write.

The expiration of our January covered calls is today, and we have one position (UBER) likely to be called away for maximum gains (great scenario) and another (ADNT) that is too close to call and will likely come down to the close (good scenario).

The shares of this large bank were recently upgraded to ‘Buy’ at UBS and Jefferies.

This biotech is forecasted to grow at an annual rate of 35.60% over the next five years.

Moving DuPont (DD) to Sell.

Part of the marijuana sector’s strength, of course, is because the broad market is also trending higher. But a substantial part comes from the growing realization, especially in wake of last week’s election that promised us a uniformly Democratic federal government, that this industry will continue to boom as legal barriers are removed.

This week, this biotech reported that its full-year 2020 net sales exceeded the high end of the company’s guidance range of $2.12 billion to $2.14 billion, growing more than 65%.

Karyopharm (KPTI) pre-announced Q4 2020 results yesterday morning and I watched the stock, which was weak (closed down 8%) throughout the day as I pondered the results. I’ll get to my thoughts in a minute. First, the numbers.

This Top Pick is a speculative buy, but has recently become more buyable after the company announced its plans to offer up to $35 million in additional shares.

This tech company beat analysts’ EPS estimates by $0.10 last quarter.

Yesterday after the close Accolade (ACCD) reported Q3 results that surpassed expectations on both the top and bottom lines.

This Canadian pharma company is forecasted to grow 111.5% next year.

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.