During the past two months we’ve seen big Fed rate hikes (with another likely next week), multi-decade highs in inflation, some earnings duds and leading economic indicators heading sharply south, but the market has held its own, and this week, if all goes well, we could get an intermediate-term green light. That means you should have your eyes open and shopping list ready, but we’re not ready to go nuts quite yet, as we don’t anticipate signals, there’s still plenty of damage to repair and earnings season is just revving up. For now, our Market Monitor remains at a level 3.



This week’s list has another batch of biotech names (including some speculative high-flyers), though for our Top Pick, we’re going with a medical services provider that offers both growth and reliability.

I am delighted to take the reins of the Cabot Stock of the Week advisory and hope to keep the good times rolling in our portfolio! With the market finally showing signs of life, or at least resilience, much better days lie ahead, and there’s lots of money to be made during the next big thrust.

This week’s new recommendation is the rare stock that’s already having a very good year – and is still undervalued. It’s a stock that was in our Stock of the Week portfolio not long ago and has demonstrated enough strength of late to gain re-entry.



Details inside.

I’m going to keep the weekly commentary section rather short today. My hope is that everyone has had the opportunity to watch our latest subscriber-exclusive webinar from Wednesday as I covered a lot of ground, including closed trades, open trades and potential upcoming trades. We also discussed the ins and outs of bear call spreads and covered the importance of risk management.

Earnings season is finally upon us.

Next week offers up a few potential trading opportunities, particularly in some of the market stalwarts. Johnson and Johnson (JNJ), AT&T (T), Verizon (VZ) and American Express (AXP) are just a few of the names I’ll be focusing on. Tesla (TSLA) and Netflix (NLFX) are also due to report next week. While both stocks offer some incredibly healthy options premiums, I tend to stay away from the high-flyers even if the premiums are tempting. And if I do give in to temptation, I always pare back my position size.

I’m going to keep the weekly commentary section rather short today. My hope is that everyone has had the opportunity to watch our latest subscriber-exclusive webinar from Wednesday as I covered a lot of ground, including closed trades, open trades and potential upcoming trades. We also discussed the ins and outs of bear call spreads and covered the importance of risk management.

Despite the tedious action and truckload of bad news, we are seeing some things pop up that are often seen near lows, such as growth stocks starting to find their footing and breadth doing the same. We’ve even seen some minor positive divergences from our Two-Second Indicator. Those are reasons to keep your head out of the sand and to keep your watch list up to date, especially with earnings season potentially providing a catalyst in the weeks ahead. Details inside.

Interest rates are still rising, as the Federal Reserve boosted short-term rates by 75 basis points last month, to try to stem the growth of inflation. There are some signs that it may be working. The 30-year mortgage rate actually saw a couple of decreases early last week, but nudged a bit higher on Friday, to a 5.94% average national rate. And gas prices have declined nationwide to $4.66 per gallon, from $4.68 this time last week. I know that’s not much, but, hey, we’ll take what we can get!

It’s a bear market. And there is a good chance that stocks make new lows in the weeks and months ahead.
Bear markets create fantastic opportunities for longer-term investors. History shows that bear markets create ideal entry points ahead of the next bull market. Let’s not just weather the storm. Let’s take full advantage of the very possible further downside from here in the market.


In this issue, I highlight one of the very best stocks on the market with a targeted low, low price that may be reached in the panic selling of a market bottom. Specifically, we target a highly desirable stock at a dirt-cheap price with a good ‘til cancel (GTC) at the designated price.

Today, I’m recommending a U.K. natural gas company that is trading at a ridiculously cheap valuation and is run by capable operators who generated a 40x return on their last natural gas company.
Other key points:

• •It’s benefitting from the booming natural gas market in Europe.•It’s trading at 1.5x free cash flow.•It has high insider ownership (20% of the company).

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

Since last month’s issue, we’ve seen continued volatility in the U.S. equity markets.
Trading volume was among the slowest this year; according to Dow Jones Market Data Group, the typical daily volume in the New York Stock Exchange is close to 5 billion. However, this year, it has been around 4 billion.


The second-quarter earning session is just around the corner. Investors are eager to see how companies are contending with soaring inflation and other factors, including the U.S. labor market participation.

The old Wall Street bromide that says “bull markets climb a wall of worry” can be applied to lithium. The battery metal is facing new worries over the impacts of a proposed tax that many fear will keep supplies restricted. While potentially bad for the EV market, it has so far been good for prices.

Elsewhere, steelmaking coal is on the rebound while related stocks are looking good. Industrial metals, meanwhile, are coming off major lows but have rebound potential.



I continue to recommend that we remain mostly defensive until weakness subsides.

This week got off to a weaker start Monday ahead of important inflation data Wednesday and Thursday, which could set the tone for the market for the weeks to come. Buckle up!

The flavor of the market hasn’t changed in the last week, in my view. There is still a sense that many high growth stocks have run too far. I think the lesser-informed general public hears about the recent slide in the mega-caps (AAPL, AMZN, MSFT, FB, etc.) and thinks they are “the market,” and that since they’re going down the market is in trouble.

It may seem unnecessary to write covered calls in a raging bull market. but that’s seldom the case. Over time you are likely to get a better return with this income strategy than just holding a market index. And you get a paycheck.

The raging bull market took a breather. The S&P 500 actually pulled back 7% from the high at the peak of the recent Labor Day selloff. But that seems to be over. The market has since regained some traction and appears to be resuming an uptrend.

Election season is now in full swing. In less than seven weeks, or only 49 days, the country will select its next president, representatives from all 435 House congressional districts, 35 senators and 12 state governors.

The beautiful thing about micro-caps is that you can invest in stocks that are both “growth” and “value.”

The market has served up a good deal of volatility lately and for the most part our stocks have handled it well (so far).

Markets were abuzz this week with talk of a “tech meltdown,” with Tesla (TSLA) getting hit rather hard on Tuesday, falling more than 20% before bouncing back 10% yesterday.

After a stratospheric 60% rise from the March low, the S&P 500 pulled back 7% in the last few days.

The recent (and ongoing?) tech momentum reversal appears to be due to a variety of concerns ranging from doubt about valuations, worries about the pace of the economy’s recovery, the lack of another stimulus package and slowing growth in the Federal Reserve’s asset purchases.

The overall market remains in an uptrend, but we’re seeing more and more unusual action among individual growth names, and thus are making moves mostly on a stock-by-stock basis.

Our second recommendation is a sale of a previous pick whose shares are not recovering fast enough.

Our first idea today is a food distributor who beat EPS estimates by $0.10 last quarter and has a 6.8% annual dividend yield, paid quarterly.

The idea is to sell a covered call, meaning you already own or you just purchased V on the buy recommendation.

This software company is forecasted to grow at a rate of 13.8% next year.

This biotech is seeing great results from its studies of SER-287 for ulcerative colitis, a condition that affects more than 750,000 North Americans.

There are five top holdings in this closed-end fund.

With 32 stocks in our portfolio and a market that’s going through all manner of gyrations right now, it’s time to part ways with a few of our underperforming positions.

This medical equipment company walloped earnings estimates last quarter, posting EPS of $0.75 vs. the $0.38 that Wall Street had expected.

The market’s continued weakness has tipped our Cabot Tides to the negative side of the fence for the first time since April.

Back on August 13, when the broad market was strong and marijuana stocks were even stronger, I took partial profits in our four strongest stocks (which were also our four largest positions) because they looked very extended to the upside.

This consumer electronics company is forecasted to grow at an annual rate of 15% over the next five years.

When we got into this stock we fully expected a lot of twists and turns. We didn’t expect the current drama.

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.