Quick note: Because next Monday is Memorial Day, our next issue of Profit Booster issue will be published Wednesday, May 29.

Coming out of May expiration we had five positions close for full profits (noted below), and we are going to exit one position today for a virtual breakeven as PR closed below the strike price that we had sold (totally fine). First, let’s start with the one trade we need to adjust …

Quick note: Because next Monday is Memorial Day, our next issue of Top Ten will be published Tuesday after the close, May 28.

The market’s good-looking rebound continued last week, with big-cap indexes notching new highs and most other indexes close to doing so. Granted, a lot of individual stocks are still battling with resistance from their prior highs in February/March and many growth names are set to report earnings during the next couple of weeks. Throw in the fact that sentiment has definitely gotten a bit complacent again and you want to pick your stocks and entry points carefully. Still, right now the intermediate-term trends are up for the market’s major indexes and most leading and potential leading stocks. We’ll keep our Market Monitor at a level 8.

This week’s list has a lot of enticing names, with some showing power and others set up nicely to break out if the bulls remain in control. Our Top Pick is a retail name that appears to be finally getting going after a long, tedious consolidation.

The market is at all-time highs, and so are many of our Cabot Stock of the Week stocks. Sure, there are potential landmines out there – inflation, the Fed, this Wednesday’s Nvidia (NVDA) earnings report if it fails to meet lofty expectations, etc. – but right now, Wall Street is buying, so we will too. Today, we add one of the market’s best growth stocks so far this year. It’s been sitting in Carl Delfeld’s Cabot Explorer portfolio since late last year – he has a huge gain on it already – and we were reluctant to add it to the Stock of the Week portfolio until it pulled back a bit. Now it’s done so – the stock peaked in mid-March – but it’s building momentum again. It’s one of the best AI plays not named Nvidia or Microsoft.

Details inside.

The market has steadily improved its standing since its low three weeks ago, so much so that our Cabot Tides and Two-Second Indicator have returned to bullish territory; that had us start putting money to work last week and we’re doing a bit more buying tonight. Granted, this isn’t the same environment as, say, last November, as buying pressures are still sporadic and growth stocks are good (not exceptional), so we’re moving in steps and want to be “pulled” into a heavily invested position via more strength.

In tonight’s issue, we review all of our stocks, especially our recent buys, and write about one growth area where it appears investor perception has changed for the better in a big, big way.

Somewhat quietly, the Dow has rallied eight straight days, and is leading the market higher as of late. Such is the rotation of the market, especially during earnings season (which I touch on in this issue).

For the week the S&P 500 gained 1.4%, the Dow rallied 1.75% and the Nasdaq gained 1%.

Somewhat quietly, the Dow has rallied eight straight days, and is leading the market higher as of late. Such is the rotation of the market, especially during earnings season (which I touch on in this issue).

For the week the S&P 500 gained 1.4%, the Dow rallied 1.75% and the Nasdaq gained 1%.

In the May Issue of Cabot Early Opportunities we dig into prospects across next-gen AI-enabled devices, emerging markets, meal replacement shakes and picks-and-shovels type infrastructure plays.

As always, there should be something for everybody.

Enjoy!

Somewhat quietly, the Dow has rallied eight straight days, and is leading the market higher as of late. Such is the rotation of the market, especially during earnings season.

For the week the S&P 500 gained 1.4%, the Dow rallied 1.75% and the Nasdaq gained 1%.

There’s no doubt the evidence has improved during the past three weeks, with the major indexes living above their 50-day lines, the broad market returning to good health and with some leadership names perking up, too. Of course, that doesn’t mean it’s perfect out there—defensive-type indexes and stocks have been outperforming, earnings season has been very tricky and we’re even starting to see some hot and heavy action in speculative names, which usually isn’t a great sign. All in all, the evidence is certainly more good than bad, so we’ve extended our line a bit but are also looking to be “pulled” into a more heavily invested position should more leadership names emerge. For now, we’ll leave our Market Monitor at a level 7.

This week’s list has something for everyone, with a lot of charts showing power, usually following earnings. For our Top Pick, we’re going to the cyclical side of the market, with a name that has out-of-this-world earnings and is just emerging from a tight area.

It’s another dreaded inflation week, yet there’s not much dread in the market right now, considering the S&P 500 is up 3.75% in May and the Dow is off to its best winning streak in May ever (!). Still, a “hot” CPI or PPI number this week could prompt another pullback like we saw in April, so this week we’re playing it safe by adding a reliable, large-cap, dividend-paying healthcare stock. It’s been a longtime favorite of Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Details inside.

Markets have continued to improve, and so have economic statistics. Housing price increases—while slowing somewhat—are still on the rise, with the Case-Shiller Index posting a 7.3% increase in prices for the month.

ADP employment rose to 192,000, higher than the 183,000 expected. Job openings declined just a bit, to 8.5 million from 8.8 million last month. And the unemployment rate edged up from 3.8% to 3.9% in April.

As many analysts focus on inflation and the job market, they miss that earnings per share for companies in the S&P 500 for the first quarter now look to be up 5.2% from a year earlier, according to FactSet. Since profits and profit growth are the lifeblood of an economy and stock market, it pays to watch them closely.

For this week’s new idea, we go to a Canadian-based company focused on a different resource and technology crucial to North America and beyond.

WHAT TO DO NOW: Do a little buying. The market’s evidence has improved somewhat, as have our indicators, though we haven’t seen any fresh green lights just yet (Cabot Tides on the fence, Two-Second Indicator getting there, etc.) and growth stocks are still hit and miss. Given the improvement and the big-picture positives (including our bullish Cabot Trend Lines), we’re putting a little money to work but are still to hold plenty of cash. Tonight, we’ll average up on Noble (NE) and start a half-sized stake in CrowdStrike (CRWD), which will leave us with about 40% on the sideline. If the rally falters, we’ll prune, but obviously if the buyers flex their muscles after Labor Day, we’ll be looking to add more. Details below.

Small caps had a decent week with the S&P Small Cap 600 ETF (IJR) rising just over 2% since our last update. This is a welcome relief on a number of levels, including from a technical perspective.

In late July the ETF looked like it was going to challenge the year’s high (from February) near 108. Momentum stalled at 105 as the calendar turned to August. By the 18^th (two weeks ago) the IJR was just below 100, sitting on its 200-day moving average line.

This week, markets took slower economic growth numbers to mean no more interest rate hikes and higher stocks. That’s the logic of Wall Street today.

Laszlo Birinyi (pronounced BUH-ree-nee), an investor who “listened” to the market rather than corporate or financial news, passed away this week. He was someone who thought differently. His theory about the flow of money that made him one of the nation’s foremost stock pickers in the 1990s will endure.

After a strong first seven months of the year, stocks retreated in August. Is this a normal consolidation or the start of a bigger correction after Labor Day?


Anything is possible. On the one hand, such pullbacks are normal and healthy after a strong run higher in the market. The economy still appears nowhere near a recession. There is still an enormous amount of cash on the sidelines. It’s near the end of the rate hike cycle. And artificial intelligence is triggering a new tech boom.

It seems like only yesterday when winter/spring faded and summer rolled in. Our kids wrapped up their classes, reminding me of Alice Cooper’s timeless classic “School’s Out.” As Van Halen wrote, “Summer’s here and the time is right, for dancin’ in the streets.”

The stock market did some sweet dancing with an 11% surge from Memorial Day through early August. Unlike the cold, narrow winter at the start of the year, in which seemingly only the Magnificent Seven stocks ran higher, most stocks thrived in the summer sun. From the official start of the season, the average stock in the S&P 500 sprouted a 10% gain.

The market tends to be lackluster in the late summer. But that goes double for the last week of the summer.

Unless there is a riveting headline, the overall market is likely in a holding pattern until the rubber hits the road next week after Labor Day. Sobered up investors back from vacation will take a fresh look at things after they wrap up the summer and come back from vacation. What will they see?

We include our comments on earnings from Macy’s (M) and Kohl’s (KSS). Duluth Holdings (DLTH) will report on August 31.

Earlier this week, due to circumstances beyond our control, we suspended our rating on shares of Kopin Corporation (KOPN). This means that the shares have no rating: They are not a Buy, Sell, Hold or any other rating, but are in essence unrated. We apologize for this unusual situation.

After three rough weeks in August, small caps have finally begun to stabilize around their 200-day moving average line.

I’d like to say blame for the weak performance rests fully on the shoulders of small-cap financials due to rising yields, commercial real estate mortgage default risk, etc.

But the truth is most sectors have been weak. Small-cap health care looks downright awful, with the Invesco S&P Small Cap Healthcare ETF (PSCH) hitting a new low for the year late last week.

Today August 23 will be my last day as the author of Cabot Micro-Cap Insider.

After a fabulous first seven months of 2023, stocks are pulling back so far in August. What can we expect from here?

A pullback or consolidation in the market at this point is normal and even healthy. And that’s what this will have been if the market gets back on track. There are also two potential catalysts to reignite the rally this week: Nvidia (NVDA) earnings and Jackson Hole.

It was the May Nvidia earnings report that triggered the artificial intelligence tech rally that added another leg to the bull market. Another positive earnings report could reinvigorate technology stocks after a rough August so far. The Fed will also deliver comments this week at the annual Jackson Hole thing. Dovish remarks would be positive for the market.

The capital markets are always interesting, and seemingly more so now. A lot of trends are coming together that could drive some late-year turbulence.

Artificial Intelligence (“AI”) is this year’s hot topic. Following a remarkably strong outlook last quarter, chipmaker and AI beneficiary Nvidia (NVDA) is scheduled to report earnings on Wednesday. The company’s shares surged on Monday in advance of the report as speculators place bets for another blow-out report. Other Magnificent 7 tech stocks are riding the wave. If Nvidia’s revenues, earnings and guidance are uninspiring, tech stocks will have a rough year-end.

There were no earnings reports this week. Macy’s (M) is now scheduled to report earnings next Tuesday, August 22. Kohl’s (KSS) will report the following day, August 23. Duluth Holdings (DLTH) will report on August 31.

Today we are moving shares of four companies, Toshiba (TOSYY), Holcim AG (HCMLY), First Horizon (FHN) and ESAB Corporation (ESAB) from BUY to SELL.

I’m closing out my NexPoint Diversified (NXDT) recommendation and selling my shares. I had an update call last week; I would characterize the update call as positive (more details below).

We currently own the AAPL January 17, 2025, 135 call LEAPS contract at $48.00. You must own LEAPS in order to use this strategy.

I want to add some additional downside exposure; so, with QQQ trading for 347.13, I want to place a short-term bear call spread going out 51 days and outside of the expected range to the upside, or 368. My intent is to take off the trade well before the July 21, 2023, expiration date.

After recently locking in profits on our SPY June 16, 2023, 430/435 bear call spread, it’s time to look towards selling some premium for the July 21, 2023, expiration cycle with 56 days until expiration (dte).

I will be exiting the Costco (COST) trade today.

ELF and SNOW Report

Costco (COST) is due to announce earnings Thursday after the closing bell.

We currently own the DBC January 17, 2025, 21 call LEAPS contract at $4.80. You must own LEAPS in order to use this strategy.

WFC rallied over the past expiration cycle and as a result, our May 19, 2023, 40 calls were assigned, and our entire position was “called” away last week. We made 10.76% on the trade.

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.