Our national high-interest-rate nightmare is over, as the Fed has (finally) started slashing short-term rates in a big way, cutting by 50 basis points last week. The market likes the aggression, sending two of the three major indexes to new all-time highs. Is it the beginning of a new – and more egalitarian – leg of the bull market? Could be. Regardless, let’s strike while the iron is hot, adding shares of the leading company in one of the hottest new U.S. markets: sports betting. It’s a recent recommendation from Mike Cintolo in his Cabot Top Ten Trader advisory.

Details inside.

As I noted last week, because of family travel this Monday’s update is focused on our open positions. Let’s dive in …

As I noted last week, because of family travel this Monday’s update is focused on our open positions. Let’s dive in …

The market has been volatile in recent weeks, but the two biggest pieces of evidence to us have been the continued longer-term uptrend, as well as the buoyant action among many individual growth stocks, a few of which we own; while they can get tossed around, they have tended to bounce back strongly as soon as the pressure comes off the indexes. That said, there are still some flies in the ointment out there, with many broad growth measures just so-so we’re not cannonballing into the pool, but we are putting some more money to work tonight, averaging up in a current holding and adding one more potential leader.

Welcome to fall! The September Issue of Cabot Early Opportunities is heavy on software and industrial names, two areas of the market where I continue to see plenty of emerging opportunities and potential for share prices to benefit from lower rates.

Enjoy!

The market bounced back very nicely from the previous week’s losses, ahead of the big Federal Reserve announcement this week. By week’s end the S&P 500 had rallied 3.2%, the Dow added 1.9%, and the Nasdaq rebounded 4.9%.

The post-Labor Day selling was worrisome, suggesting the correction that began in mid-July (for the big-cap indexes) or March (for the broad market) was still ongoing. And, frankly, we continue to think that—from a top-down perspective, the market is still mostly working through a consolidation, and safer measures are outperforming (a sign big investors are hesitant). That said, there’s no doubt the action among individual stocks remains mostly encouraging: Last week saw tons of beefy action, with many roaring right back to (or out to) new high ground as soon as the pressure came off the indexes. We’re going to nudge our Market Monitor up a level 7, though our general advice (small new positions, hold some cash) still holds.

This week’s list again has many familiar names from a range of sectors, a sign that the underlying resilience is persisting and broadening a bit. Our Top Pick has a great-looking launching pad—as with many names, it hasn’t broken out yet, so either start small here and use a loose leash and/or aim to buy on a decisive breakout.

It’s Fed rate-cut week. Will Jerome Powell and company come out of the gates quickly, slashing rates by a full 50 basis points, as the majority of traders now expect? Or will they start with a more sober, 25-basis point cut … which is what I expect? In the long run, it probably doesn’t matter much. But in the current market, the answer will likely determine whether last week’s bounce-back has legs – or if another October bottom is in order.

In the meantime, today we add a stock that has nothing to do with interest rates: a fast-growing water company. It’s a recent recommendation from Tyler Laundon in his Cabot Early Opportunities advisory.

Details inside.

The market bounced back very nicely from the previous week’s losses, ahead of the big Federal Reserve announcement this week. By week’s end the S&P 500 had rallied 3.2%, the Dow added 1.9%, and the Nasdaq rebounded 4.9%.

The market bounced back very nicely from the previous week’s losses, ahead of the big Federal Reserve announcement this week. By week’s end the S&P 500 had rallied 3.2%, the Dow added 1.9%, and the Nasdaq rebounded 4.9%.

What a month! Markets have had some pretty wild moves since last month, gyrating with significant volatility, and that looks like it may continue for a while. But that’s OK as the volatility is now serving up some pretty exciting discounted opportunities for investing.

Economically speaking, inflation abated somewhat, with core inflation falling to 3.2% for August, its lowest point in three years. And that sets the stage for an estimated 25 basis point reduction in interest rates when the Federal Reserve meets next week, according to the latest economist polls. The rate gurus now think that we may see a total of three rate cuts before the end of the year.

Lower inflation numbers yesterday made interest rate cuts inevitable which moved the market, led by Nvidia (NVDA), which surged 8%. I intended to recommend Nvidia at a price of 100 so I will patiently watch this bellwether stock closely.

To be a good, patient and calculating investor, one needs to do two things at once: Be aware of big macro issues and trends and focus attention on micro issues. That is, closely watch specific companies and stocks, especially smaller, micro stocks offering the biggest upside and risk demanding closer attention.

Today, we recommend a fund that does just that - with a history of remarkable outperformance.

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.

The November rally is alive and well. After the market soared to the highest weekly returns of the year in the first week of the month, the rally sputtered last week. But it has come alive again after a good inflation report.

Last week, the Hong Kong Monetary Authority hosted hundreds of bankers including the heads of 90 global financial institutions to discuss the current status and future outlook for the world’s capital markets. Despite the increasingly tight grip that China has on Hong Kong, which is leading to a diminished relevance for the island state, notables including Morgan Stanley CEO James Gorman and Goldman Sachs head David Solomon participated in the in-person meetings. The draw: Hong Kong remains an important gatekeeper for access to mainland China’s financial markets.

This has been a very positive month so far in the market. Will the rally continue?

After three straight down months for the S&P 500 where the index dipped into correction territory (down 10% from the high), the index has turned around and is up over 5% so far in November. The catalyst is the perception that interest rates have peaked.

This week’s note includes our comments on earnings from Adient (ADNT), Ammo, Inc (POWW), Bayer AG (BAYRY), Berkshire Hathaway (BRK/B), Brookfield Re (BNRE), Elanco Animal Health (ELAN), Goodyear Tire & Rubber (GT), L.B. Foster (FSTR), TreeHouse Foods (THS) and Warner Bros Discovery (WBD). The earnings deluge continues next week.

WHAT TO DO NOW: Remain cautious overall, but if you have a ton of cash, it’s OK to put a little to work. Our market timing indicators have improved, but by our eye, haven’t yet turned up, and while last week was a great first step for the market, there hasn’t been much follow through or expansion of new highs. To be clear, we’re optimistic and a few good days could make all the difference, but right here we’re still going slow and seeing if the market and leadership can truly emerge. In the Model Portfolio, we’ll buy another half of DraftKings (DKNG), leaving us with around 65% in cash. We’re also restoring our Buy rating on Uber (UBER) for those that don’t own any given the stock’s very powerful snapback. If things kick into gear, we’ll likely put money to work quickly, but right now we’re going slow and letting the rally prove itself. Details below.

The broad market has traded higher for eight straight sessions, the longest run since 2021. The Nasdaq is up for nine sessions.

The S&P Small Cap Index is up in five of the last nine sessions, but the last four have been down. What the ...?!!

Big picture, this isn’t great for the broad market as we want a more broad-based rally. And in theory it’s not great for us.

But the reality is our portfolio isn’t diversified along the same lines as the small-cap index. We’re not overweight financials, energy and health care (we have little to no exposure to all three) and instead are focused on pure-play opportunities that aren’t expected to trade in lockstep with the small-cap index.

With a 29% average annual rate of return over 13 years at Fidelity, Peter Lynch certainly earned his status as a legendary investor.

Recently, Lynch revealed that indexes like the S&P 500 and Nasdaq have been propped up by a handful of high-flying tech stocks. “The truth is, we’ve been in a stealth bear market for a long while now if you don’t count those 10 or so darling mega-caps,” Lynch remarked with his trademark sarcasm.

That may soon be coming to an end.

Cannabis stocks are up 10%-20% since I encouraged you to buy them on weakness in my last update on October 31.

That’s a nice short-term gain – much better than the 5.5% S&P 500 advance over the same time.
I hope you participated.

Traders may want to book profits. The stocks are strong this morning on news that Ohio voters approved a referendum on recreational use legalization. This rally could reverse. However, cannabis stocks are still down sharply from the rescheduling rally last summer. I suggest continuing to stay long in the midst of the overall weakness since that rescheduling news rally last summer.

What a difference a week can make. Just one week ago, the market was reeling. The S&P 500 concluded the third straight month of declines after falling into correction territory a few days earlier. But then stocks turned around and had the best week of the year with the S&P 500 rallying nearly 6% for the week.

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.