After falling into correction territory earlier this month, the S&P 500 came off the bottom and has been trending higher. Is that the end of the selling? I don’t think the market has decided yet.

Some tariff clarity could arrive soon. Stocks rallied strongly to start the week partially on news that pending tariffs will be more “targeted.” Technology stocks also rallied on the perception of higher-than-expected AI demand. But the market is very headline sensitive. And the headlines are likely to keep on coming.

If I had to bet, I would say the market probably made the bottom for now and is more likely to trend higher. But I don’t have a high degree of confidence right now. A couple of negative headlines could send stocks plunging to new lows.

There are some select stocks that are actually near the 52-week high. I’m more comfortable selling a covered call on a stock with recent strong performance than initiating a new stock position at this point. In this issue, I highlight a covered call for the biopharmaceutical company AbbVie Inc. (ABBV).

Despite some more worrisome price action throughout the week, the three leading indexes were able to eke out gains last week. For the week, the S&P 500 gained 0.5%, the Dow rallied 1.2% and the Nasdaq advanced by 0.2%.

Nobody is going to claim that the past couple of weeks have been perfect, but given where things stood following the market’s three-week mini-crash, the recent action has been constructive; short term, we’d expect more upside testing, too. That said, on an intermediate-term basis, there’s much more work to do, as the trends remain down, most indexes have recouped easily less than half of their prior declines and the majority of stocks are actually still below 200-day lines. We are going to bump up our Market Monitor a notch to a level 4 to respect the action, but overall we remain cautious as we wait to see how this bottom-building process develops.

This week’s list has something for everyone, though all of them have shown some intriguing strength of late as the market has found support. Our Top Pick has pushed back to its old highs on great volume after some positive news last week.

Calm has been restored to the stock market, at least for now. And while stocks haven’t exploded to the upside, it does appear as if a temporary bottom has been put in. With that in mind, today we add a pure growth stock – a cybersecurity play with plenty of momentum, recommended by Mike Cintolo to his Cabot Top Ten Trader audience last week. We also have no sells from our own portfolio, as many of them have been in full recovery mode the last week or two.

Details inside.

Despite some more worrisome price action throughout the week, the three leading indexes were able to eke out gains. For the week the S&P 500 gained 0.5%, the Dow rallied 1.2% and the Nasdaq advanced by 0.2%.

Despite some more worrisome price action throughout the week, the three leading indexes were able to eke out gains. For the week the S&P 500 gained 0.5%, the Dow rallied 1.2% and the Nasdaq advanced by 0.2%.

After a punishing three-week decline, the market has stabilized a bit, and we’ve actually seen some secondary positives, too, with a short-term positive divergence in our Two-Second Indicator, falling Treasury rates and some big dips in investor sentiment. That said, both the markets intermediate-term and longer-term trends are pointed down now, and while there are some resilient stocks out there, most names are also buried beneath key levels. A bottom-building process could be underway, and big-picture, we don’t view this downturn as unusual (see more on that in today’s issue), but for now, we’re staying defensive with a big cash hoard, waiting for the market to change character.

There is no sugarcoating it: last week was ugly for the market as the S&P 500 fell 2.3%, the Dow lost 3.1%, and the Nasdaq declined by another 2.4%. And while the market looks terrible, on a positive note, stocks had their best day of the year on Friday.

After a horrid start to the week, the market actually began finding support last Tuesday and has bounced a bit since. To us, it’s a baby step, and ideally the start of a near-term rally phase that will allow us to not just judge the strength of any recovery efforts, but to also see if any fresher growth stocks per up. However, for the here and now, the intermediate-term trend of the major indexes and vast majority of stocks is pointed down, so we’re remaining mostly in our bunker. If we do see some upside follow-through this week, we could become a bit more optimistic but we’ll wait to see if that happens.

This week’s list is another hodgepodge, with some zingers, some defensive titles and a name or two that are dancing to their own drummer. Our Top Pick has a unique story, and now perception is increasing as demand and pricing picks up.

Is the worst of this late-winter selloff over? Or are there lower depths still to plumb? A lot may depend on what the Fed says this week. Or the next bit of tariff news. Or who knows what. There’s a lot of uncertainty out there. And the market hates uncertainty. But after a month of almost nothing but selling, there are some encouraging signs of life.

Still, the wise move is to stick to safety, so this week we add a safe dividend stock that’s in about as reliable a business as there is: trash collection. It’s a new recommendation from Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Details inside.

There is no sugar coating it: last week was ugly for the market as the S&P 500 fell 2.3%, the Dow lost 3.1%, and the Nasdaq declined by another 2.4%. And while the market looks terrible, on a positive note stocks had their best day of the year on Friday.

There is no sugar coating it: last week was ugly for the market as the S&P 500 fell 2.3%, the Dow lost 3.1%, and the Nasdaq declined by another 2.4%. And while the market looks terrible, on a positive note stocks had their best day of the year on Friday.

Mattel (MAT) reported revenue of $1.08 billion, down 0.7% from last year, and missing the consensus estimate of $1.09 billion by 1%. Earnings per share, however, exceeded the consensus estimate of $0.16 by 18.75%, coming in at $0.19. Key metrics showed mixed performance: Barbie sales fell 5.9% to $266.10 million, Fisher-Price dropped 17.5% to $135.90 million, while Hot Wheels rose 3.9% to $327.40 million, and other brands reached $471.90 million, beating estimates.

Small caps have been up and down over the last week with the net result being that there was almost no change since last Thursday (through 10:25 AM ET today).

That doesn’t sound too meaningful until you consider that the S&P 500 is down 2.6% over the same period and that small caps have outperformed in all sectors except for consumer staples, energy and utilities.

This was a difficult week for stocks. Yesterday the S&P 500 sank 2.3% while the tech-heavy Nasdaq declined 3.6%. Collectively, the so-called “Magnificent Seven” lost $768 billion in market value.

America does face some uncertainty but overall has a strong economy but, as I have highlighted, the stock market has become too concentrated at the top and debt is building up too rapidly. China, on the other hand, faces economic issues such as weak consumption, a property slump, 20% youth unemployment, and a struggling stock market in the red so far in 2023. Given the size and importance of China’s economy, this impacts all markets.

Value stocks are starting to gain traction.

No, they’re still not outperforming growth stocks. But the 10.5% year-to-date gain in the Vanguard Value Index Fund (VTV) puts it on track for its best year since 2021, and potentially its third-best year in the last decade. That’s progress. And much of the progress has come this month, as the previously thin bull market rally has spread to the myriad unloved non-tech sectors. Value stocks are up more than 3% this month, outperforming growth stocks (as measured by the QQQ ETF), which are flat in July.

The market took a jab to the face last week, but it still looks good. It’s still a strong market. But one that is showing some vulnerability.


After a great first half and a strong July, the market pulled back 2% last week, reversing most of the July gains. The culprit was a Biden administration announcement of new AI chip export restrictions to China. That news also combined with a perceived likelihood of a Trump presidency and the possibility of further trade frictions with China. The technology sector, and semiconductor stocks in particular, took it on the chin.

V.F. Corporation (VFC) announced the sale of Supreme, the famed streetwear brand, to EssilorLuxottica, the owner of Ray-Ban, for $1.5 billion, leading to a 13.6% surge in VFC’s shares on Wednesday. Supreme, a New York City skate shop turned global fashion icon since 1994, became renowned for its exclusive collaborations with luxury brands like Louis Vuitton and Nike. VFC acquired Supreme in 2020 for $2.1B, hoping to leverage its trendy image to boost its portfolio. However, the huge debt load and miserable margins took their toll, and by last year the company had written down two-thirds of Supreme’s value.

All of a sudden small-cap stocks are the talk of the town.

I guess that’s what happens when the asset class posts its best five-day streak since April 2020!

Despite the recent move, Barclays reports that Commodity Trading Advisor (CTA) positioning is still neutral on small caps (overweight S&P 500 and Nasdaq), leaving ample room for more buying.

Stock market trends last longer than anyone expects.

That was the oft-repeated adage of my former boss, Cabot legend Tim Lutts. And he was right. For all the tsk-tsking about the current bull market being long in the tooth, it’s actually tied for the shortest bull market (21 months) in history at the moment, according to data from Ryan Detrick of Carson Research Group. The average bull market lasts 61 months – nearly three times the length of the current one!

WHAT TO DO NOW: Today is a horrid day for most growth and AI-related stocks, continuing the rotation that began last week. All in all, there remain lots of crosscurrents, with our market timing indicators now positive, but individual growth stocks remain very hit or miss, all while earnings season is starting to rev up. Thus, we continue to favor holding a chunk of cash on the sideline while taking things on a stock-by-stock basis. In the Model Portfolio, we did some buying earlier this week, adding half-sized stakes in the ProShares Russell 2000 Fund (UWM) and Robinhood (HOOD), though tonight we’re going to sell our remaining small position in Uber (UBER) while placing Pure Storage (PSTG) on Hold as it takes on water with most peers. Our cash position is around 36%, which we’ll hold onto tonight as we watch to see how the rotation progresses from here.

There isn’t much not to like about this market. After a strong first half of the year, the market is having a great July. And the rally is broadening out. It’s not just technology anymore.

Wow. Just wow. Not only has this market rally continued to forge on, it’s broadened out too. After a 14.5% gain in the first half of this year, the S&P is putting together an impressive July with a better than 3% gain so far.

The latest leg of this rally has been sparked by a better-than-expected June CPI report. Interest rate optimism abounds. Consensus now expects a Fed rate cut before the end of the year and an increased expectation that overall interest rates have peaked and are likely to trend lower for the rest of the year.

Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing solid EPS of $1.33/share, which exceeded estimates by 4 cents. WFC also beat revenue estimates by $410M, coming in at $20.69B, but the stock is trading lower this morning as the company posted a 9% YoY decline in net interest. We moved this one to HOLD back in the May 27 issue at 60, and it just hasn’t quite been able to clear that prior high. Given that we have a 119% overall gain on this stock in the rear-view mirror, and that interest rates – and therefore WFC earnings – are only likely to go lower from here, we’re moving this one to SELL.

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.

I’ll be sending out alerts for several of our Fundamentals portfolios over the next two days as we stay mechanical and roll our January 19, 2024, calls into the February/March expiration cycles. For those who are new to the service and wish to add a position, please read through the alert carefully.

Cannabis stocks are up sharply – 20% or more – since I suggested buying them on weakness in a Cabot Cannabis Investor update sent to you on January 10.

Using my two favorite exchange-traded funds (ETFs) as proxies for the sector, the AdvisorShares Pure US Cannabis (MSOS) has advanced 20%, and AdvisorShares MSOS 2X Daily (MSOX) is up 37%.

WHAT TO DO NOW: Most of the evidence is still bullish, both for the overall market and for leading stocks, but as the January wobbles have continued, some air pockets are emerging, with today being a tough day for growth stocks. Today we’re going to sell half of Duolingo (DUOL), which is breaking support and has given back its post-earnings gains, while placing our half-sized stake of ProShares Russell 2000 Fund (UWM) on Hold. Our cash position will be around 26%.

Volatility popped a bit today and even though I would like it to be slightly higher, I’m going with a high-probability iron condor to bring in a bit of income. Hopefully, we continue to see volatility, as seen through the VIX, push above 15. If so, more trading opportunities should present themselves.

I will be exiting our JPMorgan Chase (JPM) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.

Okay, everyone, earnings season is finally upon us. I suspect we are in for an interesting earnings season, and to get us started, I will be holding a subscriber-only webinar tomorrow at 12 p.m. ET.

There is little to no value left in our XLU January 19, 2024, 61 puts. As a result, I’m going to buy them back, lock in some nice profits and immediately sell more premium. I’ll be doing the same in a few other positions as we move throughout the rest of the week.

With just over one week left until expiration, and some potential short-term market-moving info ahead of us (CPI, earnings) I’m going to go ahead and do the prudent thing by taking our SPY bear call spread off the table.

Okay, now that we have initiated all the Small Dogs positions, I’m going to place trades on the remaining five Dogs of the Dow positions.

The Dogs of the Dow is an investment strategy that involves investing in the top ten Dow Jones Industrial Average stocks with the highest dividend yields. The theory behind the investment strategy is that the highest-yielding stocks have most likely lagged the market and as a result, are undervalued and due to outperform in the year ahead.

WHAT TO DO NOW: Remain bullish, but take action where needed. The market (and especially growth stocks) have taken a beating in the first two days of the year—there are reasons to believe this is partly due to seasonal shenanigans, so we’re not overreacting, but we’re also not holding and hoping. In the Model Portfolio, we’ll sell half of DraftKings (DKNG), which is our weakest stock, and place Duolingo (DUOL) on Hold, leaving us with around 25% in cash. We do see some potential buys setting up, but we’ll hold the cash for now and see if growth stocks (and the market) can find support.

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.