It looked like the bulls were ready to put up a fight last Wednesday, but it’s been all down since then, lowlighted by today’s action. Stepping back, we have two thoughts: Short term, there was definitely some panic today, and the fact that we saw a solid intraday bounce (closed well off the lows) implies some sort of bounce is possible. That said, the sharp, straight-down action from the market peak less than four weeks ago tells us a good amount of repair work is needed even if we do bounce. In terms of actions, we haven’t been pushing the envelope for many weeks, so if you have a good-sized cash position, we wouldn’t necessarily sell wholesale. That said, you should honor most stops (simply holding everything and hoping isn’t advised) while remaining patient. We’ll drop our Market Monitor to a level 4 (from 6) given the damage.

This week’s list has a lot of proper charts even after the latest selling storm. For our Top Pick, we’re going with a well-situated biotech firm that popped on positive drug trial results that will dramatically expand the opportunity for the big-selling drugs already on the market.

It’s become a full-blown market correction. When will the selling stop? No one knows. But as always, when it does, there will be ample opportunities to make huge profits on the other end of it. In the meantime, we prune a few of our hardest-hit positions today and add a new position designed to capture growth in the fastest-rising economic power in the world, India. It’s a brand-new recommendation from Carl Delfeld in his Cabot Explorer advisory.

Details inside.

Going into last week we knew it had the potential to be a wild five-day stretch, and the market didn’t disappoint as the indexes swung violently, and sector rotation was intense. By week’s end the S&P 500 had fallen 1.55%, the Dow had rallied 0.5%, and the Nasdaq had lost 3.8%.

Going into last week we knew it had the potential to be a wild five-day stretch, and the market didn’t disappoint as the indexes swung violently, and sector rotation was intense. By week’s end the S&P 500 had fallen 1.55%, the Dow had rallied 0.5%, and the Nasdaq had lost 3.8%.

Infrastructure has been a hot topic for the last couple of years given passage of a bipartisan bill to finally spruce up the U.S. and try and address climate change.

This month we’re jumping into a pure-play infrastructure company that owns railroads and deep-water ports supporting crude oil and clean fuel shipments, as well as a modern power plant that’s getting tons of calls from AI data centers.

One thing – the company reports quarterly results after the bell today!

Two years after the yield curve inverted, there’s still no U.S. recession in sight. As a result, financials – beaten to a pulp during the double whammy of the 2022 bear market and the March 2023 bank collapse – have become the fastest-growing non-tech sector of the market. It’s also one of the most undervalued. So in this month’s issue, we add a very recognizable big bank that does a little bit of everything – and seems to be everywhere. It’s growing at a healthy clip and yet is cheaper than even the average financial at the moment.

Details inside.

Explorer stocks gained ground this week as market sentiment improved along with the odds of a Fed rate cut this fall.

I’ve been encouraging you to lighten up on some of the Magnificent Seven stocks over the last month or so. In just the last two weeks, these stocks have lost over $1.6 trillion in market value as market enthusiasm has waned and insiders have sold some stock.

What’s behind this trend?

Here are three possible reasons why big tech is facing a tough market.

Cannabis is a highly politicized sector because it is extensively regulated.

The political news has been very good for cannabis. But cannabis investors have been slow to recognize this.

A late-July Fox News poll showed that Vice President Kamila Harris has caught up to and surpassed Donald Trump in five key swing states.

Cannabis stocks should have advanced on the news. Not only is Harris a better cannabis advocate than President Joe Biden, she’d obviously be more favorable to the sector than Trump.

As I mentioned in my first installment of the Cabot Turnaround Letter, the most valuable lesson I have learned in my professional career as a price forecaster is that the rate of change – of just about any metric – tells us everything we need to know about the immediate future. When the rate of change accelerates, it tends to continue accelerating. When it decelerates, it tends to continue decelerating. And the resulting push and pull is a large part of what comprises the business cycle.

Going into last week we knew it had the potential to be a wild five-day stretch, and the market didn’t disappoint as the indexes swung violently, and sector rotation was intense. By week’s end, the S&P 500 had fallen 1.55%, the Dow had rallied 0.5%, and the Nasdaq had lost 3.8%.

The top-down evidence remains decent, with the broad market holding its gains and testing new recovery highs. The issue, though, is the formerly strong tech stocks that included a ton of the market’s liquid leadership—frankly, many of these names have decisively cracked intermediate-term support and look vulnerable to further selling. As we’ve written a few times now, there are still a decent number of setups out there, but for now, we think it’s better to play things a bit cautiously: We’re leaving our Market Monitor at a level 6.

This week’s list has some early earnings winners and includes some ideas outside of traditional growth. Our Top Pick is another real estate play that appears to be lifting out of a longer-term consolidation.

A Midsummer Night’s Scream? That’s what the second half of July has felt like, with stocks (especially tech stocks) plunging and volatility exploding. Now comes another week of Fed speak and massive earnings reports, so don’t expect the choppy waters to settle just yet. But it’s important to remember that it’s still a bull market, and for a variety of reasons, I think the selling will be short-lived. So, today we’re taking another big swing by adding a recent IPO recommended by Mike Cintolo. If you’ve gone to Europe in the last two to three years, it’s possible you’re quite familiar with this company.

Details inside.

Cannabis stocks are astonishingly weak following the nomination of Rep. Mike Johnson (R-LA) as House speaker. He has always opposed cannabis legislation. So, the fear is that Secure and Fair Enforcement Regulation (SAFER) Banking Act reform (allowing banks to serve cannabis companies) cannot get out of the House. This is probably true. However, Senate leaders could put the reform in must-pass legislation, and the House may well accept it, given how many current House members have approved the bill in the past.

So far, our recommended companies have reported strong earnings but the share performances following the reports have generally been sloppy. What’s going on?

Investors, of course, are forward-looking. So, decent trailing results can take a back seat to the incremental changes in near-term prospects. As we note in our discussion about the recent and continued slide in shares of Citigroup (C), investors are assuming that the company not only has no chance of improving its earning power but are also assuming that profits will probably slide backward. Comcast (CMCSA) reported one of the strongest quarters in its history, yet the outlook is for incremental headwinds in its customer count, so the shares slid.

It’s officially a correction. The S&P 500 fell 10% below the 52-week high on a closing basis last week. Now what?

As usual, all eyes are on the Fed. The Central Bank will decide on interest rates on Wednesday. Also, this week are earnings from Apple (AAPL) and several other large companies and another jobs report on Friday. But the Fed should be the main event.

This week’s note includes our comments on earnings from 10 of our companies. The deluge continues next week.

The note also includes the monthly Catalyst Report and a summary of the November 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.

It’s said that the market climbs a wall of worry. It’s been a slippery wall lately, and this was the week when the bear case for the stock market really seemed to gather momentum.

The short list of bear case arguments includes the following:

The war between Israel and Hamas could easily expand into a broader conflict and draw the U.S. (and Iran, among others) deeper into a situation with no clear exit ...

WHAT TO DO NOW: The market cave-in continues, with some sacred cows and resilient stocks catching up on the downside now. The trend clearly remains down, and while we’re not craving more cash (69% coming into today), have only smaller positions and see some legitimate oversold signs out there, we’re also not going to just hold and hope with things that are caving in. Tonight, then, we’ll sell the rest of our ProShares S&P 500 Fund (SSO) and one-third of what we have left in Uber (UBER), which will leave us with just over three-quarters of the portfolio on the sideline. Details below.

Over the past month Tesla (TSLA) has struggled as continued price cuts have boosted sales but narrowed profit margins. It is also failing to live up to its brand as more than just a maker of electric cars (EVs).

Higher interest rates are eating into EV demand. Competition is catching up as Tesla last launched a new passenger vehicle in 2020. In October, BYD (BYDDY) outsold Tesla for the first time.

The market has lost all the October gains. Despite the strong economy and optimistic earnings, interest rates continue to cast a shadow.

The economy is killing it (for now). Third-quarter GDP is expected to exceed 5%. That’s an economy nowhere near recession. And earnings should reflect that economic strength. Strong earnings can lift many stocks higher.

The S&P 500 index, of course, is the most widely used benchmark for stock market returns. Individual investors, financial media and those overseeing complicated institutional portfolios use this metric as their core measure of absolute and relative performance.

Professional investment consultants may take umbrage with this statement. These highly trained analysts are well-versed in the intricacies of quantitative analysis and can parse portfolio returns, relative to potentially hundreds of alternative benchmarks, into dozens of marginally relevant categories down to the 8^th decimal place.

This week’s note includes our comments on earnings from Nokia (NOK). Next week, the deluge starts, with earnings from as many as ten companies.

With the July 21, 2023, expiration cycle coming to a close in nine days, 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 a few more new trades in our active portfolios.

With the July 21, 2023, expiration cycle coming to a close in nine days, 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 a few more new trades in our active portfolios.

After over a month of teetering back and forth, with no real opportunity to take profits, our QQQ bear call spread finally hit our stop loss. The trade marks our first loss since April 11. Our win ratio now stands at 31/36 trades, or 86.1%. And our total returns over the past year sit at over 130%.

WFC has provided us a nice source of income since we introduced the big bank to the portfolio. We’ve managed to bring in 18.98% of options premium/income in just under one year using the Income Wheel strategy while the stock itself has only made half of that return at 9.19%.

The bullish momentum continues to benefit all our portfolios. None of this should be a surprise as all of our portfolios are inherently long delta.

Our BITO June 30, 2023 puts are essentially worthless, so we can lock in some decent profits and immediately sell more puts.

SPY has pushed into another short-term overbought state coupled with a gap higher today. As a result, we are going to once again add a bear call spread to the mix.

We jumped into a half-sized position in Airbnb (ABNB) in January 2022 then filled the second half in August of last year. Since we’ve been in the position ABNB has never done well. And while I fully believe in the business model I have concerns about the stock’s potential over the next 3-6 months.

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.

We’ve held one-third of a position in Xponential Fitness (XPOF) after having sold the first third last September for a 28% gain and the second third just last month for a 39% gain.

We need to sell more premium in WBA and MMM today. I will be selling more premium in several of our positions throughout the various Fundamentals portfolios, including a few brand-new positions in our Growth/Value and Buffett portfolios.

I’ve decided to lock in my second profitable trade for the week. With 28 days left until expiration, I want to take off our July IWM iron condor for a profit.

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.