AI is the catalyst driving the technology sector, which is driving the market higher. Over the last month, the tech sector is up 10.42% while the S&P is up 2.95%. Seven of the 11 sectors are negative for the past month.

But technology stocks may be running out of gas. Without the heavy lifting from technology, it’s easy to see the overall market trending sideways or down, at least for a while.

Income is king in markets like this. The register still rings when the market stumbles. There’s also an opportunity right now. With the S&P and many stocks near their 52-week highs, it’s a good time to get high call premiums. Also, you can lock in strong total returns from these stocks if they are called.

Even the best bull markets have ups and downs. We can play the increased likelihood of a flat or down market by priming the income pump to pay us through the rough patch. In this issue, I target another covered call that will enhance the already exquisite income of a monthly dividend stock.

While the gains/losses in the three major indexes were mostly muted last week, there was some interesting rotation out of the AI/Semiconductor theme and into recent underperformers … though this is hardly anything to write home about as it was just two days of this type of action.


By week’s end, the S&P 500 had gained 0.65%, the Dow had risen by 1.75%, and the Nasdaq had fallen marginally.

We have been starting to see signs that the stretched rubber band might be snapping back a bit, with a few strong areas taking on water while the Dow Industrials and the broad market rally. It’s something to watch and, if it gets a head of steam going, could launch some new leadership while denting some popular names. That said, we’ll see how things play out, especially as the end of Q2 (and the first half) is this week, which can often bring some volatile trading. All in all, we remain in our current stance and are taking things on a stock-by-stock basis.

This week’s list has some familiar names, but also a few that have recently come under big accumulation on some sort of news. Our Top Pick has come alive after earnings as the long-term growth plan (buoyed by some industry consolidation) comes into focus. Aim for dips to enter.

Stocks have hit the pause button in the last week. Is summer malaise already setting in? Or is this merely a deep breath before the buyers gain more fodder in the form of dovish Fed speak or the next round of earnings reports? We’ll see. In case it’s the former, today we add a value stock that potentially has an immediate, near-term catalyst. It’s the first contribution from the newest addition to our Cabot team, Matt Warder, a market veteran and cyclicals/commodities expert who has taken over our Cabot Turnaround Letter advisory. I think you’ll enjoy Matt’s unique, outside-the-box perspective.

Details inside.

While the gains/losses in the three major indexes were mostly muted last week, there was some interesting rotation out of the AI/Semiconductor theme and into recent underperformers … though this is hardly anything to write home about as it was just two days of this type of action.

By week’s end, the S&P 500 gained 0.65%, the Dow rose by 1.75%, and the Nasdaq fell marginally.

While the gains/losses in the three major indexes were mostly muted last week, there was some interesting rotation out of the AI/Semiconductor theme and into recent underperformers … though this is hardly anything to write home about as it was just two days of this type of action.

By week’s end, the S&P 500 gained 0.65%, the Dow rose by 1.75%, and the Nasdaq fell marginally.

Despite some troubling signs under the surface of the market, mega-cap tech once again led the indexes’ charge higher. And because of the heavy weighting of these tech stocks in the S&P 500 and Nasdaq, those indexes gained 1.8% and 3.75%, respectively, while the Dow fell 0.4% on the week.

Despite some troubling signs under the surface of the market, mega-cap tech once again led the indexes’ charge higher. And because of the heavy weighting of these tech stocks in the S&P 500 and Nasdaq, those indexes gained 1.8% and 3.75%, respectively, while the Dow fell 0.4% on the week.

In the June Issue of Cabot Early Opportunities, we continue to lean into AI themes while taking a swing at a speculative space communications company. We’re also trying to keep things real here on earth with a picks-and-shovels-type infrastructure play, and we pull back the curtain on a real rarity in 2024, a software stock with a nice chart!

As always, there should be something for everybody.

Explorer stocks had a good week led by Super Micro (SMCI) up 20% and Cloudflare (NET), up 9%, as PayPal (PYPL) has struggled a bit as it launches a new, higher-margin digital ad business. The S&P 500 is up 14% so far this year but the 10 biggest stocks recently represented almost 37% of the index’s total value, the highest since September 2000, according to FactSet. Use caution and take partial profits if you have some of these in your portfolio.

We have been discussing some great companies and breakthrough technologies, but it is easy to overlook that energy is the foundation of economic and technological development. It is also at the core of how countries secure and project national power.

So today, we add a U.S. renewable energy company that is a leader in an alternative energy source that’s making a comeback.

Despite some troubling signs under the surface of the market, mega-cap tech once again led the indexes’ charge higher. And because of the heavy weighting of these tech stocks in the S&P 500 and Nasdaq, those indexes gained 1.8% and 3.75%, respectively, while the Dow fell 0.4% on the week.

On the one hand, there are still a decent number of stocks that act well and are generally advancing, but on the other hand, more and more names across a variety of areas are hitting air pockets or simply falling by the wayside. To us, the divergence tells us the risk of a big character change is elevated, and that’s why we continue to advise holding a decent chunk of cash—but with plenty of stocks still acting well, we’re also OK with selective buying in names that are under strong accumulation. We’ll again leave our Market Monitor at a level 7, though we remain flexible and will adjust exposure if need be.

This week’s list is another eclectic one, with an increasing number of turnaround-type stories. Our Top Pick is a bigger outfit that’s very cheap but is starting to see some AI benefits—and the stock has shown exceptional power of late.

The last two weeks have been a lot less fun than June and most of July. But big picture, a pullback is not remotely surprising.

Through yesterday’s close, both the large and small-cap indices were down about 2.6% from their recent highs. The Nasdaq was down almost 5%.

What is a little surprising is the rapid change of tone out there. This can be squarely blamed on Fitch’s downgrade of U.S. debt and Moody’s bearish notes on those 10 banks they think don’t look so hot.

At least four states posted record cannabis sales in June and July, Illinois, Maryland, Massachusetts and Missouri.

These sales trends and ongoing legalization around the world are why global cannabis sales will hit $104 billion a year by 2030, says a recent report from Vantage Market Research. That would represent an annual growth of 26% a year from 2023 to 2030.

Despite these positive trends, cannabis stocks are being held back by delays in reform efforts in Washington, D.C.

As most everyone knows, last week, Fitch Ratings downgraded the credit rating of U.S. Long-Term Foreign-Currency Issuer Default Rating (IDR) to AA+ from AAA. This follows by a decade a similar downgrade by Standard & Poor’s.


The response by politicians, media, capital markets participants and commentators was a big yawn at best, with more than a few sharp dismissals and denials of the report’s relevance, timeliness and accuracy.


In the real world, which is outside of the publicity bubble, what does the downgrade actually mean? In the near term, almost nothing. The ability of the U.S. government today to attract capital on respectable terms and repay its debts on time and in full is rock solid. Few if any sovereign debt has a repayment track record and underlying fundamentals that are as sturdy as that of U.S. government debt.

Stocks are starting the week back in business after last week’s dip over the credit downgrade. The credit downgrade doesn’t appear to be having much effect on the market at this point. Unless that changes, the market appears poised to continue to forge higher, at least for the time being.

Meanwhile, it’s still earnings season and the past couple of weeks have been busy for the portfolio. Earnings had been very kind to the portfolio two weeks ago with Digital Realty (DLR), AbbVie (ABBV), and Intel (INTC) all getting sizable boosts with better-than-expected results. But the season soured on the portfolio last week as both Qualcomm (QCOM) and Star Bulk Carriers (SBLK) laid eggs.

We comment on earnings from Adient (ADNT), Dril-Quip (DRQ), ESAB Corp (ESAB), Frontier Group Holdings (ULCC), Gannett (GCI), Goodyear Tire (GT), Janus Henderson Group (JHG), Kaman Corporation (KAMN), Warner Bros Discovery (WBD) and Western Digital (WDC).

WHAT TO DO NOW: Continue to pare back and hold some cash—though you should also continue to hold your resilient stocks and keep your eyes open for an eventual turn back up in the market (and growth stocks in particular). In the Model Portfolio, we sold pieces of DoubleVerify (DV) and Celsius (CELH) earlier this week, leaving us with 36% in cash. We’ll stand pat tonight but will be on the horn if we have any further changes going ahead.

This is a short week as we begin the second half of 2023 with inflation down, recession fears fading, and the animal spirits of investors alive and well.

In the first half of 2023, market performance was positive and narrow, largely driven by the big tech names, and especially artificial intelligence (AI) related stocks. The Dow was up 3.8%, the S&P 500 gained 15.9%, and the tech-heavy Nasdaq was up 31.7%. We will continue to explore the world for the best value and growth stocks providing both conservative and aggressive ideas. EVs across the supply chain, resources, and emerging markets remain the focus but we have the flexibility to change course as opportunities arise.

The market continues to ride the soft-landing high. The S&P 500 returned more than 3% in July and is now up 19% YTD and within just 4% of the all-time high.

The bullish mood is brought on by the fact that the miserable inflation/Fed conundrum that drove stocks into a bear market last year is ending. And it appears that we will not have to endure a recession. Even though S&P earnings are falling for the third straight quarter, investors are bullish about the future.

This was another quiet week in the micro-cap world as large-cap stocks continue to roar higher.

Many large-cap companies have reported, but we will have to wait a few weeks for our micro-cap companies to report Q2 earnings.

Here are some takeaways from earnings season.

The good times are here again. The S&P 500 is up over 19% YTD and is now within just 4% of the all-time high. Stocks are in a strong uptrend that began in the beginning of May and appear likely to move still higher.

Inflation is crashing. The Fed is about out of bullets. And there is no recession in sight. Things could always discombobulate down the road. But there doesn’t appear at this point to be anything ahead in the next month or so that will change the current positive narrative.

Tomorrow marks the earnings releases of several big banks, most notably JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC).

I want to add some downside exposure so with DIA trading for 337.40, I want to place a short-term bear call spread going out 37 days and outside of the expected range to the upside, or 350. My intent is to take off the trade well before the May 19, 2023, expiration date.

Our DIA bear call spread has hit its stop loss, so we are going to stay mechanical and exit the trade.

Our April 14, 2023 36 calls are due to expire this week. As a result, I want to buy back our April calls and immediately sell more calls going out further in duration. This will increase our deltas and allow us to benefit from continued upside in the underlying stock.

It’s time to start selling puts again in GDX. We’ve managed to bring in 10.8% worth of premium since introducing GDX to the Income Wheel Portfolio.

The recent rally in the Dow has pushed several of our Dog stocks higher. As a result, several of our short calls are being tested and the overall deltas of those tested positions are nearing parity.

I am buying back our short calls today and immediately selling more premium. The underlying stock position is up 4.07% since we initiated the position. Our DOW position is up 6.17% over the same time frame.

INTC has pushed through our 31 call strike, and the delta of our short call is nearing parity with our current LEAPS contract. As a result, I want to buy back our short calls and sell more calls.

Our March 31, 2023, 59 puts are essentially worthless. As a result, I want to lock in the profits and immediately sell more premium.

As a reminder, this trade is for the CVX position in the Growth/Value Portfolio, not the CVX position that resides in our Dogs of the Dow Portfolio. I have a CVX position in both, as both portfolios are looked at as separate entities to keep things mechanical and consistent.

With 24 days left until expiration, we have the ability to take off our SPY iron condor for a nice profit.

INTC has pushed through our 27 call strike, and the delta of our short call now stands at parity with our current LEAPS contract. As a result, I want to buy back our short calls and sell more calls. Reestablishing our deltas will allow us to participate in any further near-term upside in INTC.

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 Momentum 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 Momentum Trader features.