First off, this being our last issue of the year, all of us at Cabot wish you and yours a very happy, healthy and prosperous New Year. We’ll be back with a regular update next Thursday after the calendar flips.

As for the market, it’s been a fantastic year, with leading growth titles letting loose on the upside, and we’re happy to have made hay while the sun is shining—the year isn’t quite done but it’s looking like our second-best returns of the past 18 years, when I took over. We’re glad to have done right by you.

That said, we always deal with the here and now, so we’re riding into year-end in a cautious stance, as growth stocks have wobbled and our Cabot Tides and Two-Second Indicators are waving yellow flags. We’re definitely flexible, as some of the recent selling may have cleared the decks for another leg up, but given the evidence, we want to see strength first before embarking on another major buying spree. In this issue, we highlight more than a few names we could jump into if things go well, while sharing more details on our remaining stocks and the recent action.

Cannabis stocks are set to close out the year with a punishing 14% decline. Cannabis investors need help from anywhere they can get it.

It looks like it could come from an unusual place in 2025. The future of the cannabis industry is now in the hands of President-elect Donald Trump.

If anyone told me a few years ago this would be the case, I might have asked them what they are smoking.

However, the reality is that during his presidential campaign, Trump endorsed all three of the main reforms that would legitimize the industry and boost cannabis share prices: Rescheduling, bank reform known as SAFER banking, and legalization of recreational use. Trump endorsed the first two outright. He implicitly endorsed legal rec-use because he supported the Florida referendum which would have made this change. At the very least, he has openly endorsed decriminalization.

First and foremost, this is our last issue of 2024—next Tuesday is one of our two weeks off all year—so we want to wish you and yours a very Merry Christmas, Happy Holidays and a healthy and prosperous New Year.

Also, before we dive into this week’s idea I wanted to address our December expiration cycle trades. Both NCLH and KD stocks finished above their strike prices, which means we walked away from those trades with our full profits.

First and foremost, this is our last issue of 2024—next Monday is one of our two weeks off all year—so we want to wish you and yours a very Merry Christmas, Happy Holidays and a healthy and prosperous New Year. We’ll be back at it with a fresh Top Ten issue on January 6.

As for the market, things finished up with a nice rally last Friday, but that doesn’t undo the action of the prior couple of weeks as a whole, which saw many leaders take hits and many major indexes crack their intermediate-term uptrends. To be clear, we remain flexible, and if the buyers pounce on the recent weakness for a few days, we think there will be lots of “resumption” patterns among individual stocks. Still, given the near- and intermediate-term selling we’ve seen, we want to see buyers show up in a meaningful way first before putting a bunch of money back to work. We’ll leave our Market Monitor at a level 5.

This week’s list is once again very growth-y, which we do find encouraging. Our Top Pick showed exceptional power in November and has now rested for three weeks, offering up a solid entry point, though we advise starting small given the environment.

Jerome Powell went full Grinch last week, sparking a brief market selloff after saying the Fed would cut rates at a slower pace than expected in 2025. Prior to that, there were some obvious cracks beneath the market’s surface, so Powell’s downer of a press conference served more to expand the selling than cause it. But the nice rebound in the last two trading days shows the bulls are still mostly in charge, which means it’s a good time to add a mid-cap water stock that Tyler Laundon just introduced to his Cabot Early Opportunities audience.

Details inside. Happy Holidays!

The breadth worries that had so many traders on edge finally reared their ugly head and took a bite out of the market as the indexes took a big hit on Wednesday. By week’s end things had improved a touch, but still the S&P 500 fell 2.45%, the Dow lost 2.54%, and the Nasdaq declined by 2.71% last week.

The breadth worries that had so many traders on edge finally reared their ugly head and took a bite out of the market as the indexes took a big hit on Wednesday. By week’s end things had improved a touch, but still the S&P 500 fell 2.45%, the Dow lost 2.54%, and the Nasdaq declined by 2.71% last week.

As we head into the end of the year, markets have paused though are still bullish. A little bit of worry is a sign of a healthy market and some of the pullback is no doubt taking profits for tax reasons.

The budget showdown in Washington, which needs to be settled by Saturday, is not helpful.

The Federal Reserve cut interest rates by a quarter point yesterday and in a preemptive move, suggested only two more reductions next year. This is a signal that interest rates will remain somewhat elevated as inflation that has come down significantly remains a stubborn trend.

We wrap up a fruitful year with a December Issue of Cabot Early Opportunities highlighting five names spanning everything from bottled water to social media to bitcoin mining.

I like the diversity of this Issue, which has something for everyone.

Many are surprised to learn that the concept of telehealth wasn’t a direct result of the Covid pandemic in 2020. Indeed, the practice of online consultations between patients and medical personnel has been practiced for over 20 years, and this month’s featured company is arguably the first one to bring it to global prominence.

By most measures, 2025 looks pretty good for stocks.

The Fed has begun a rate-cutting cycle that should last for the next two years. Historically, stocks do well when the Fed is cutting rates and there is no recession. And the economy has been solid. This bull market is just 25 months old and has returned 65%. Bull markets usually don’t just run out of gas after two years. In fact, the average bull market has lasted 50 months and returned 152%.

But stocks are expensive. The S&P currently sells at 22.3 times forward earnings compared to an average of 16 times over the last twenty years. The market returned 26% in 2023 and about 28% this year with two weeks to go. It might be tough for stocks to deliver another consecutive year of 20%-plus returns.

It may be that a lot of the easy upside is behind us. Stocks can still perform well, but they’ll probably have to earn it in 2025.

In this issue, I highlight a stock that is poised for a strong earnings rebound in 2025. It is a stock that bounces a lot between the highs and lows. And it is currently well below the high. It is also one of the best healthcare companies on the market at a time when the population is older than ever before and aging at warp speed.

For the second straight week, the leading indexes went in vastly different directions as the S&P 500 fell 0.6%, the Dow lost 1.9%, and the Nasdaq gained 1%.

Jerome Powell’s press conference yesterday, which followed the FOMC’s March policy decision (hold) and updated Summary of Economic Projections (SEP), went better than expected.

Many investors were primed for Powell to dial back expectations for three rate cuts later this year. Yet the SEP maintained that stance, which was set in the December SEP. That’s despite a slightly higher PCE inflation rate and GDP forecast than was expected three months ago.

This week the Fed left interests rates again unchanged and Super Micro Computer (SMCI) became part of the S&P 500 index. An announcement of a two million convertible shares offering by Super Micro led to a pullback in the stock though long term, it’s smart to raise capital after the sharp rise in the share price.

Elsewhere, Washington is fixated on the potential push to force a change in the ownership of TikTok while China, as strongly expected, objects. This is a bit ironic since X, Instagram, Facebook, and Google aren’t available to Chinese citizens.

It’s time for all investors to obsess about the Fed again. The Central Bank has its March meeting this week and Wall Street is on pins and needles waiting to hear what they might vaguely insinuate.

It’s another big Fed week in a market that has rallied for more than four months.

The S&P 500 is up 7.28% in the first two and a half months of this year and has rallied over 25% since the low of late October. Stocks have been thriving amid the likely peak in interest rates, expected Fed rate cuts this year, a still-strong economy, and the artificial intelligence (AI) catalyst in the technology sector.

The financial media over the past weekend and in the early days of this week has been full of stories about the upcoming Fed meeting on Wednesday. It’s remarkable how much ink (or electrons) is being spilled in efforts to predict what the Fed will do, and why, along with all of the implications of this or that outcome.

In today’s note, we discuss the recent earnings reports from Kohl’s (KSS), Kopin Corp (KOPN) and Volkswagen AG (VWAGY).

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

WHAT TO DO NOW: Remain bullish, but keep some dry powder on the sideline. Most of the evidence remains positive, but the choppy, churning action among some leading stocks (as well as the Nasdaq itself) is still in place. To be fair, many fresher names are acting well, but we’re content to hold some cash and our strong performers and see how things play out. After putting some money to work last week, we’ll stand pat tonight with a cash position of around 27%.

Small-cap stocks continue to underperform their larger peers though, with the exception of this morning, the S&P 600 Small-Cap Index ETF (IJR) has been inching higher toward resistance at 110.

It’s possible that with expectations for the first rate cut being pushed out to June (currently, subject to change) that my expected small-cap rally has been similarly delayed. I have been surprised that this asset class hasn’t seen more momentum.

Since I last wrote to you on February 28, cannabis stocks have fallen nearly 14%, using the AdvisorShares Pure U.S. Cannabis (MSOS) as a proxy for the group.

There are certainly good reasons why “the doubts” have crept back into the minds of cannabis investors, which I will explain in a second. But my take is that by now, the concerns may be fully priced in, so the group looks like a solid buy.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

Earnings season is over, and the market’s main focus is on the February inflation numbers that come out this week.

Stocks were able to continue to build on last year’s late rally in January and February. Mixed Fed and interest rate news was overcome by strong earnings, particularly in technology. Signs that artificial intelligence is continuing to drive strong demand and sales lifted the sector and the market.

Our WBA calls are worthless and due to expire. As a result, let’s buy back our short calls and immediately sell more call premium.

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.

We currently own the JPM January 17, 2025, 100 call LEAPS contract at $46.20. You must own LEAPS in order to use this strategy.

I will be exiting the American Express (AXP) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.

I will be holding a subscriber-only webinar tomorrow at 12 p.m. ET. Click here to sign up. No worries if you can’t make it, we archive everything here at Cabot. You can find all the archived recordings here.

I’m buying back our short calls in AAPL and TXN and immediately selling more calls. Additionally, I plan to add a brand-new stock to the portfolio over the coming days. Stay tuned.

I’m going to buy back our short calls in EEM and EFA and immediately sell more call premium going out to the December 1, 2023, expiration cycle. I plan to roll our remaining October 20, 2023 call positions in SPY, TIP and VNQ tomorrow.

With the October 20, 2023, expiration cycle coming to a close in a few days, it’s time to start buying back the rest of our October 20, 2023 short calls and selling more premium going out 30 to 60 days. I’ll be sending out numerous trade alerts for the various portfolios over the next few days, including a few new names in our active portfolios.

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.