The market’s rally has run into trouble, with our Cabot Tides and Two-Second Indicator effectively back on the fence. When it comes to growth stocks, most are acting more resiliently than the broad market, but even there it’s hit and miss, with lots of air pockets though many names that are acting well, too. Because of the divergent action, we’ve had a flurry of moves since the last issue, paring back or selling three names, but putting money to work in two names (including a new addition last week). All told, we’ll still have about 27% in cash and have a few stocks that look great, but are also keeping a close eye on a couple that remain iffy.

In tonight’s issue, we go over all our thoughts on the market and our various moves, as well as write about the solar sector that may be getting going after a long slumber, as well as small caps in general, which could finally get going ... if interest rates behave themselves.

Cannabis stocks remain unloved by investors. This makes the group buyable because catalysts are on the horizon.

The tricky part now is that it is more difficult to predict that we may see a catalyst near term, or even when the next one will occur. Patience is required.

Here is a look at the four main potential catalysts.

Sizing up a merger arb opportunity requires more than just garden variety equity analysis. In his famous letter to Berkshire Hathaway shareholders in 1988, Warren Buffett laid out four questions to answer regarding arbitrage situations:

1. How likely is it that the promised event will indeed occur?
2. How long will your money be tied up?
3. What chance is there that something still better will transpire – a competing takeover bid, for example?
4. What will happen if the event does not take place because of anti-trust action, financing glitches, etc.?

Today, we add a new Cabot Turnaround Letter recommendation that we think comes close to answering all four.

In an effort to keep the Profit Booster portfolio as diversified as possible, today we are adding an emerging broker play that is coming off a strong quarter, and just last night announced a large buyback.

All in all, the good-not-amazing environment remains in place, with intermediate-term uptrends intact for the major indexes and a solid amount of good-looking leadership out there. That said, there also remain a fair number of potholes out there, and most broader indexes tested their 50-day lines late last week. All told, there are plenty of stocks in a variety of sectors that are working, so we’re bullish, but picking strong names, targeting decent entry points and booking a few partial profits on the way up are advised. We’ll leave our Market Monitor at a level 8.

This week’s list has something for everyone, and we like how many of them have shown excellent power of late. Our Top Pick looks like an institutional way to play the energy transition trend. Aim to enter on dips.

It’s a great time for income. The market is at an all-time high. The May through November period is historically a more lackluster period for stocks. Income generation is an ideal way to generate positive returns when stocks aren’t rising. But not if the stocks generating the income get knocked down by rising rates.

There is a great answer: midstream energy stocks. These are companies that transport and store oil and gas for a fee. The subsector is among the highest yielding of all income-generating stocks. And unlike many dividend stocks, they have thrived over the last few years of rising interest rates. For the most part, these stocks are not interest rate sensitive and can endure inflation or recession. They have proven to be the perfect sector to generate a high income in this market environment.

In this issue I highlight a stock that has been the very best income generator in the Cabot Income Advisor portfolio. It has been held profitably in the portfolio on three past occasions. Each time it delivered a positive total return along with several covered calls for huge income. It’s a tested and true income-generating superstar.

Stocks are hitting the pause button, which is normal action after another big run-up the first half of May. Could another breakout arrive before Wall Street goes on summer vacation? It did last June and July. But usually, summer slowdowns are to be expected. So this week, I add a stock that appeals to growth and value investors alike – one that I recommended to my Cabot Value Investor readers earlier this month. It’s a well-known company hiding in plain sight, but one that’s been undervalued by the market until recently.

Details inside.

As I mentioned last week, this is a shorter version of the Weekly Review, focused on our open positions. Those are...

As I mentioned last week, this is a shorter version of the Weekly Review, focused on our open positions. Those are…

The stock market’s 5% swoon from several weeks ago has quickly become a distant memory as the indexes are back to their previous highs following another week of strong performances, as the S&P 500 gained another 1.3% last week, while the Dow rose 1%, and the Nasdaq added 1.75%.

The stock market’s 5% swoon from several weeks ago has quickly become a distant memory as the indexes are back to their previous highs following another week of strong performances, as the S&P 500 gained another 1.3% last week, while the Dow rose 1%, and the Nasdaq added 1.75%.

Going back to 1960, nearly 85% of the cumulative total return of the S&P 500 Index can be attributed to reinvested dividends. And that’s why today we’re adding a new high-yield fund to the portfolio that gives us exposure to fast-growing overseas markets.

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

This was an interesting week with news ranging from inflation to AI, tech struggles between the U.S. and China, and Tesla’s edge in terms of labor costs.

On Capitol Hill in Washington, Elon Musk, Mark Zuckerberg and Bill Gates and others worth an estimated $500 billion, according to Forbes, met for a closed-door Senate summit on AI.

Consumer prices rose 0.6% in August, the largest increase since June of 2022. An 11% jump in gasoline prices was the main problem, which led to a fall in average real earnings.

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.

Monday after the close, sources close to the Senate banking committee said the panel will delay its vote on key cannabis banking reform known as the SAFE Banking Act. Some investors had expected the vote to happen next week. This update probably helps explain sector weakness Tuesday.

While nearly dormant last year, the market for initial public offerings (IPOs) is starting to warm up. Mediocre or obscure companies like Pixie Dust Technologies (PXDT) and BioNexus (BGLC) inspired no one with their IPOs earlier this year. Shares of Vietnamese electric car marker VinFast Auto (VFS) surged over 300%, to $90, following their recent deal at $22, but have now collapsed to about $16 as the shares were subjected to all of the market manipulations that one would expect from an exceptionally thinly traded, poorly executed offering. Even Oddity (ODD), up about 6% from its issue price, left much to be desired.

The market is starting this week higher on optimism about a “soft landing.” But the CPI inflation number for August that comes out on Wednesday could derail or support the rally.

Things seem upbeat Monday morning. Treasury Secretary Janet Yellen said on Sunday that she is “feeling very good” about avoiding a recession while still reining in prices. Of course, she called inflation “transitory” in early 2021. There were also some encouraging numbers about the Chinese economy. Also, the Fed is widely expected not to raise the Fed Funds rate later this month.

This week there were no earnings reports or ratings changes.

The summer is over. The post-Labor Day market has arrived. What can we expect?

Historically, September is the worst month for the market. Sobered up investors back from vacation tend to be cranky when they take a fresh look at things. But seasonality doesn’t always apply. And there are some reasons for optimism.

You are receiving this unscheduled update due to recent strength in cannabis names. Your regularly scheduled update will be published on September 13.

For all of the past year, I have been steadfastly bullish on cannabis names. The group was hated, but several underlying trends told us that was likely to change. This set it up as an ideal contrarian play.

Now, the steady buying I’ve been suggesting is paying off.

Summer is over. The post Labor Day market begins this week. What can we expect?

The market has been nearly impossible to predict over the past several years. There was the pandemic crash, the recovery that began shortly after the lockdowns began, the 2022 bear market, and the surprising return to a bull market this year.

This week, we comment on results from Duluth Holdings (DLTH), the last of our companies to report this earnings season.

We also include the Catalyst Report and a summary of the September edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

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.

With all of our short-term overbought measures in extreme territory I want to add a bear call spread to the mix for the August expiration cycle. While I look at overbought extremes as simply weight of evidence, it’s hard to pass up a trade when we are seeing overbought extremes coupled with several other market indicators that are screaming a short-term extreme is here.

This morning, I published my latest recommendation: Buy 2seventy bio (TSVT).

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 am buying back our short calls today and immediately selling more premium. Our June 16, 2023, 55 calls are essentially worthless, so let’s buy back our calls, lock in some profits and immediately sell more call premium.

With the June 16, 2023, expiration cycle coming to a close at week’s end, it’s time to start buying back our 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 the potential for new trades in our active portfolios. My hope is to have all of our June 16 positions rolled by mid-day Wednesday.

We are moving shares of Molson Coors Beverage Company (TAP) from Buy to Sell. The shares are approaching our 69 price target, with only about 4% upside remaining.

WHAT TO DO NOW: The market’s action continues to take steps in the right direction, with more bullish character changes among big-picture measures and, more importantly, leading stocks. Tonight, we’re going to add some exposure—we’re going to add another 5% stake in ProShares Ultra S&P Fund (SSO), buy another half-sized stake in Uber (UBER), and start a fresh half position in DoubleVerify (DV). That will leave us with just over half in cash—still plenty of cushion if the rally falters, but also lots of dry powder to pounce on new leaders should they continue to firm up.

With 11 days left until the June 16, 2023, expiration cycle ends, we need to begin the process of rolling the remainder of our short calls and immediately selling more call premium, preferably in July. In addition, CSCO has rallied as of late, which has pushed our short calls in the money. As a result, I want to buy our short calls back and immediately sell more.

Our short calls are in-the-money and are due to expire today. As a result, we are going to buy back our short calls and immediately sell more premium.

I plucked Samsara (IOT) off our Watch List in early March after the company’s strong earnings report, hoping to grab a bigger upside move. Since then, the stock has been up and down some and closed yesterday right around our entry price.

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.