Issues
Cannabis investors continue to await action by the Trump administration on rescheduling, the next potential major catalyst for the group.
In an August 11 news conference, President Donald Trump said that he’s still considering the change and he will have a decision within a few weeks.
I believe Trump will follow through on his promise to reschedule, but this is not a 100% certainty. The most likely outcome, in my view, is that the Department of Justice will cancel a planned rescheduling hearing and issue a final rule with a public comment period.
In an August 11 news conference, President Donald Trump said that he’s still considering the change and he will have a decision within a few weeks.
I believe Trump will follow through on his promise to reschedule, but this is not a 100% certainty. The most likely outcome, in my view, is that the Department of Justice will cancel a planned rescheduling hearing and issue a final rule with a public comment period.
As you’ve probably surmised by now, I’m not the world’s biggest fan of buying stocks that are coming off fresh 52-week lows, preferring instead those that have carved out a decent bottoming pattern—both in terms of price and sentiment. Nor, for that matter, do I tend to favor buying stocks that are so far out of favor with investors that continued selling pressure is still an ever-present possibility.
But sometimes a stock becomes so cheap, so out of favor and so “wound up” with short interest and capitulation that the temptation to do some bottom fishing is simply too great to pass up. This is especially the case when the turnaround story is so compelling that it practically writes itself. Such is the case with this month’s featured recommendation, Helen of Troy (HELE).
But sometimes a stock becomes so cheap, so out of favor and so “wound up” with short interest and capitulation that the temptation to do some bottom fishing is simply too great to pass up. This is especially the case when the turnaround story is so compelling that it practically writes itself. Such is the case with this month’s featured recommendation, Helen of Troy (HELE).
What will sobered-up investors see after Labor Day when they start really paying attention again?
Although a September rate cut is largely priced into stocks, upcoming inflation and economic reports could change things. September could be a month when the AI rally is renewed and the Fed starts cutting rates, or a month where tech stocks retreat and the rate cut promise is pulled back. It’s a precarious market for stocks priced near the high.
Fortunately, there are several good stocks that are already well off the high. One area is those companies exposed to homebuying. Stubbornly high mortgage rates have held company stock prices down. But the longer-term trajectory for the homebuying market is fabulous. There is huge pent-up demand for homebuying that will ignite at some point. If rates come down in the months ahead, that ignition could occur sooner rather than later.
Several homebuilding company stocks have already spiked higher on the prospect of falling interest rates. In this issue, I highlight a title insurance company stock that has a long history of market outperformance. It is still priced well off the high, while the longer-term prospects are stellar, and it might be on the cusp of a breakout in the short term.
Although a September rate cut is largely priced into stocks, upcoming inflation and economic reports could change things. September could be a month when the AI rally is renewed and the Fed starts cutting rates, or a month where tech stocks retreat and the rate cut promise is pulled back. It’s a precarious market for stocks priced near the high.
Fortunately, there are several good stocks that are already well off the high. One area is those companies exposed to homebuying. Stubbornly high mortgage rates have held company stock prices down. But the longer-term trajectory for the homebuying market is fabulous. There is huge pent-up demand for homebuying that will ignite at some point. If rates come down in the months ahead, that ignition could occur sooner rather than later.
Several homebuilding company stocks have already spiked higher on the prospect of falling interest rates. In this issue, I highlight a title insurance company stock that has a long history of market outperformance. It is still priced well off the high, while the longer-term prospects are stellar, and it might be on the cusp of a breakout in the short term.
*Note: Your next issue of Cabot Profit Booster will arrive next Wednesday, September 3, due to the market holiday next Monday, September 1, in observance of Labor Day.
While it was a highly volatile week that included the AI story coming under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week that included the AI story coming under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
*Note: Your next issue of Cabot Top Ten Trader will arrive next Tuesday, September 2, due to the market holiday next Monday, September 1, in observance of Labor Day.
Ever since early July, the market has seen more and more bouts of rotation, and in the past two weeks, that action has accelerated, with more and more growth stocks getting hit while expectations for a Fed rate cut next month have goosed the broad market. So where do we stand overall? From a top-down perspective, the evidence has improved, but there’s also a lot of crosscurrents and leadership is in transition, which keeps things tricky. We’ll stick with our Market Monitor at a level 7 and see how things look after the coming long weekend.
This week’s list has a bunch of names from different groups, including many smaller titles, which goes hand in hand with what we’re seeing in the market. Our Top Pick had five (!) fakeouts in the past six months, this recent breakout look for real. Aim for modest dips and use a looser stop.
Ever since early July, the market has seen more and more bouts of rotation, and in the past two weeks, that action has accelerated, with more and more growth stocks getting hit while expectations for a Fed rate cut next month have goosed the broad market. So where do we stand overall? From a top-down perspective, the evidence has improved, but there’s also a lot of crosscurrents and leadership is in transition, which keeps things tricky. We’ll stick with our Market Monitor at a level 7 and see how things look after the coming long weekend.
This week’s list has a bunch of names from different groups, including many smaller titles, which goes hand in hand with what we’re seeing in the market. Our Top Pick had five (!) fakeouts in the past six months, this recent breakout look for real. Aim for modest dips and use a looser stop.
Jerome Powell was an unlikely hero to investors last week, reviving an increasingly sluggish market with his surprisingly dovish words from Jackson Hole last Friday. So stocks remain near record highs, and volatility is low, as the prospect of the Fed finally slashing interest rates again starting next month becomes increasingly realistic. Lower interest rates are particularly enticing for housing stocks, a beaten-down sector in the face of sky-high mortgage rates in recent years. So today, we add a high-profile homebuilder that’s starting to gather momentum – enough to catch the attention of Cabot Top Ten Trader Chief Analyst Mike Cintolo.
Details inside.
Details inside.
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, September 2 due to the market holiday next Monday, September 1 in observance of Labor Day.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
*Note: Your next issue of Cabot Options Trader Pro will arrive next Tuesday, September 2 due to the market holiday next Monday, September 1 in observance of Labor Day.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
It’s been a highly unusual market environment, with the overall market grinding slightly higher, but with growth stocks generally under pressure as more leaders crack or test key support. We continue to think great things will happen when looking out a few months, but we also have to deal with the here and now and have been shedding names as they act abnormally, giving us a cash position north of 50%. We’d prefer to have that lower, but are holding it tonight, waiting for at least some support to show up before putting some of it back to work.
A strong earnings season has propelled the broad market to fresh highs, and as we enter mid-August, “rotation” has become the buzzword of the moment.
We’ll respect this action by not pressing too hard on the gas today. But at the same time, with a number of attractive setups floating across my screen, we’re not going to be wildly conservative.
We step up to the plate and take a swing at three new positions today.
We’ll respect this action by not pressing too hard on the gas today. But at the same time, with a number of attractive setups floating across my screen, we’re not going to be wildly conservative.
We step up to the plate and take a swing at three new positions today.
Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.
As we roll toward Labor Day, it’s pretty much the same story when it comes to the market: Most of the evidence is at least leaning positive and we see many recent positive earnings reactions, which is a plus—but there also remain many crosscurrents out there, with plenty of selling on strength as many sectors chop sideways. We’re sticking with the same stance—holding our strong performers, but tightening stops on names that wobble and being selective on the buy side, aiming for strong entry points in case more air pockets emerge. We’ll once again leave our Market Monitor at a level 7.
This week’s list was affected by last week’s rotation, but our Top Pick is a name that had a big run but has now dipped in an orderly fashion for the past month.
This week’s list was affected by last week’s rotation, but our Top Pick is a name that had a big run but has now dipped in an orderly fashion for the past month.
Updates
WHAT TO DO NOW: Remain defensive. Near term, we are seeing a couple of rays of light, including a developing positive divergence from our Two-Second Indicator and some legitimate dips in some reliable sentiment measures, so we’re not sticking our heads in the sand as the vast majority of primary evidence and our market timing indicators are negative, with the indexes so far having trouble finding much support. We could do some nibbling if the market finds a low it can work off of, but in the meantime, we advise staying mostly on the sideline and letting the sellers finish up their work. We have no changes tonight, and the Model Portfolio’s cash position is 83%.
The market enjoyed a little bounce yesterday but is still working to find a level of support from which to mount an eventual recovery. This is a process, not an event. Nobody knows if we have reached that level yet.
We’ve been through these types of volatile markets many times in the past. While the drivers of the volatility are often different, one of the consistencies is that it is best to exercise patience and let new leaders show themselves. They always do.
In this case, the main drivers of the current market correction are Trump’s tariffs/trade war and massive disruptions in the federal government.
We’ve been through these types of volatile markets many times in the past. While the drivers of the volatility are often different, one of the consistencies is that it is best to exercise patience and let new leaders show themselves. They always do.
In this case, the main drivers of the current market correction are Trump’s tariffs/trade war and massive disruptions in the federal government.
It’s amazing what a halfway decent inflation report can do.
On Wednesday, the Consumer Price Index (CPI) came in both lower than expected and better than the previous month at 2.8%. Economists were looking for a 2.9% year-over-year gain, down a tick from the 3% gain in January. Instead, it’s down two ticks and up just 0.2% from January – again, a tick less than the 0.3% month-over-month gain that was estimated. So, Wall Street rejoiced, at least for a few hours. All three major indexes were up more than 1% in early Wednesday trading, a welcome reprieve after weeks of getting pummeled into either correction status (the Nasdaq) or near-correction territory (S&P 500 and the Dow). Yes, the thing that’s been feeding this forceful sell-off – tariffs, and an ever-escalating trade war with multiple countries – is still raging. But higher inflation is a big reason people fear tariffs in the first place. And for one month at least, inflation came in cooler than expected.
On Wednesday, the Consumer Price Index (CPI) came in both lower than expected and better than the previous month at 2.8%. Economists were looking for a 2.9% year-over-year gain, down a tick from the 3% gain in January. Instead, it’s down two ticks and up just 0.2% from January – again, a tick less than the 0.3% month-over-month gain that was estimated. So, Wall Street rejoiced, at least for a few hours. All three major indexes were up more than 1% in early Wednesday trading, a welcome reprieve after weeks of getting pummeled into either correction status (the Nasdaq) or near-correction territory (S&P 500 and the Dow). Yes, the thing that’s been feeding this forceful sell-off – tariffs, and an ever-escalating trade war with multiple countries – is still raging. But higher inflation is a big reason people fear tariffs in the first place. And for one month at least, inflation came in cooler than expected.
It’s cannabis company earnings season. So, I highlight fourth-quarter results in this issue.
Before we get to the details, here are the key takeaways from earnings reports:
* Price compression continues, creating an ongoing “Hunger Games” environment in which only the financially strong will survive, given the debt levels at a lot of cannabis companies. Much of this debt comes due over the next two years. Bankruptcies might be the clearing event that helps bring an end to price compression. None of our names appear to be at risk, but no guarantees...
Before we get to the details, here are the key takeaways from earnings reports:
* Price compression continues, creating an ongoing “Hunger Games” environment in which only the financially strong will survive, given the debt levels at a lot of cannabis companies. Much of this debt comes due over the next two years. Bankruptcies might be the clearing event that helps bring an end to price compression. None of our names appear to be at risk, but no guarantees...
Selling accelerated this week after last week was the worst since September. The S&P is down 4% YTD and at its lowest level in more than five months. The Nasdaq index is in correction territory, down more than 10% from the high.
The big issue seems to be tariffs. Tariffs on China, Canada, and Mexico are escalating. The new Canadian Prime Minister also appears to be taking a hard line, and it looks like the trade issues won’t be resolved for a while. But it’s also the fact that tariffs are hitting the economy at a vulnerable point as fears of a slowing economy are growing.
The big issue seems to be tariffs. Tariffs on China, Canada, and Mexico are escalating. The new Canadian Prime Minister also appears to be taking a hard line, and it looks like the trade issues won’t be resolved for a while. But it’s also the fact that tariffs are hitting the economy at a vulnerable point as fears of a slowing economy are growing.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Janus Henderson Group (JHG), Paramount Global (PARA) and Starbucks (SBUX).
This week’s watch list includes a focus on the suddenly interesting toy market outlook, with two major industry members poised to benefit from it.
This week’s watch list includes a focus on the suddenly interesting toy market outlook, with two major industry members poised to benefit from it.
Before we get to an update on my journey through Asia, let me offer a few thoughts regarding recent market weakness and volatility, driven by rising economic and political uncertainty. Sea Limited (SE) bucked the trend with another strong quarter while American Superconductor (AMSC) shares had another tough week after a great run, down 15.8%.
The tariff on-and-off news is creating some turbulence as are the pivotal Congressional spending and tax negotiations.
The tariff on-and-off news is creating some turbulence as are the pivotal Congressional spending and tax negotiations.
Tariffs have officially arrived. And the market doesn’t like them one bit.
On Tuesday, the Trump administration imposed 25% tariffs on Mexico and Canada and raised the level from 10% to 20% on China. Stocks fell as of midday on Tuesday, but not dramatically. It’s unwelcome news to a market that was already dealing with still-sticky inflation and diminished economic growth expectations.
On Tuesday, the Trump administration imposed 25% tariffs on Mexico and Canada and raised the level from 10% to 20% on China. Stocks fell as of midday on Tuesday, but not dramatically. It’s unwelcome news to a market that was already dealing with still-sticky inflation and diminished economic growth expectations.
After a strong start to the year, February was a down month for the S&P 500. The index is just a little over 1% higher YTD. But the news is better than it may seem.
Sure, the market has been struggling. But it’s only because of technology, which is down over 5% YTD. Nine of the other ten sectors in the S&P are positive for the year. Some sectors are having very good years as Health Care is up over 8% and Consumer Staples and Financials are up over 7% YTD.
Sure, the market has been struggling. But it’s only because of technology, which is down over 5% YTD. Nine of the other ten sectors in the S&P are positive for the year. Some sectors are having very good years as Health Care is up over 8% and Consumer Staples and Financials are up over 7% YTD.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Centuri Holdings (CTRI), Janus Henderson Group (JHG), Paramount Global (PARA), Starbucks (SBUX) and Teladoc Health (TDOC).
This month’s catalyst report features a mixed bag of attractive turnaround candidates in several industries, including software, healthcare, luxury retail and chemicals.
This month’s catalyst report features a mixed bag of attractive turnaround candidates in several industries, including software, healthcare, luxury retail and chemicals.
WHAT TO DO NOW: Remain defensive. While there’s a chance the recent selling storm could be the final shakeout of this two-plus-month consolidation, the fact is the intermediate-term evidence (both top-down, and among many growth stocks) is now negative, with a lot of damage done to leaders. We’ve been holding a lot of cash for weeks but have pared back further, selling our remaining AppLovin (APP) stake on a special bulletin yesterday, leaving us with around a 66% cash position in the Model Portfolio. We have no changes tonight but are remaining flexible (buy or sell) for whatever comes next.
While the broad market has stabilized a little over the last couple of days, we are still very much in a risk-off environment. As we all know, the market hates uncertainty. And we’re getting plenty of it these days
On-again, off-again tariff threats are the big story this week with Trump’s latest comments reiterating March 4 as the date for Mexico and Canada tariffs and April 2 as the date for reciprocal tariffs (tariffs that match those levied by other countries on U.S. exports), and an additional 10% tariff on China as of that date.
On-again, off-again tariff threats are the big story this week with Trump’s latest comments reiterating March 4 as the date for Mexico and Canada tariffs and April 2 as the date for reciprocal tariffs (tariffs that match those levied by other countries on U.S. exports), and an additional 10% tariff on China as of that date.
Alerts
Quick Takes: Vertex (VERX), Rivian (RIVN), Apple (AAPL) and Modine (MOD)
EverQuote (EVER) and RxSight (RXST) Deliver; FTAI Infrastructure (FIP) Still a Buy
WHAT TO DO NOW: Remain cautious. Due to the poor action in growth stocks in recent weeks, we’ve been steadily paring back and came into today with a 61% cash position—just as the market went over the falls this morning with some panic selling. Near term, it’s possible the market will bounce, and indeed most stocks are well off their lows today, so we’re going to hold onto our remaining positions for now—though we’ll be in touch if we make some changes later this week.
Shares of new addition FTAI Infrastructure (FIP) are trading down modestly today but outperforming the market after delivering Q2 results at the crack of dawn this morning (not after the bell yesterday, as they were supposed to).
WHAT TO DO NOW: After a sharp reversal lower yesterday, the market is suffering a selling storm today with most major indexes down 2%+ and growth stocks remaining very weak, including another chunk that are giving up the ghost. We’re going to sell our half-sized stake in Robinhood (HOOD) and put the ProShares Ultra Russell 2000 Fund (UWM) on hold. That will bring our cash position to 60%.
Enovix (ENVX), Weave (WEAV), TransMedics (TMDX) and Zeta (ZETA) Deliver
Portfolios
An updated portfolio for Cabot Options Institute – Income Trader
An updated portfolio for Cabot Options Institute – Fundamentals: All-Weather Portfolio
An updated portfolio for Cabot Options Institute – Income Trader
An updated portfolio for Cabot Options Institute – Quant Trader
Strategy
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.