The first full week of earnings season arrived last week and we decided to place our second trade of the season in American Express (AXP) by using a 20-point range, with our short strikes at 140 (puts)and 160 (calls). We felt comfortable with the range as it was not only well outside of the expected range (144 – 156) for AXP, but covered, on a percentage basis, almost every earnings move going back to October 2006. These are the type of setups we prefer to trade.

The historic move in the bond market continued to weigh on stocks last week as the S&P 500 lost 2.4%, the Dow fell 1.6% and the Nasdaq declined by 3.1%.

The historic move in the bond market continued to weigh on stocks last week as the S&P 500 lost 2.4%, the Dow fell 1.6% and the Nasdaq declined by 3.1%.

The market remains under pressure as interest rates rise, which keeps us in a cautious stance -- we’re holding nearly as much cash as we have during the past two years as few stocks are able to sustain any upside. That said, we actually think the market has a solid setup here--there are a decent number of names forming normal launching pads, sentiment is awful and earnings season could be a catalyst. The bulls still have a lot to prove, but we’re remaining flexible should the buyers appear.


Tonight’s issue reviews our remaining names and market outlook in more detail, talks about some big-picture positives to keep in mind, as well as some things we want to see as a sign the buyers are taking control. More watchful waiting is needed, but we’re keeping our watch list up to date should the market’s character change.

I’m in Amish country this week so the Cabot Explorer issue will be briefer than usual today. Markets are facing a 5% dilemma. The benchmark Treasury yield closed just above 4.9%, a fresh 16-year high.

Third-quarter GDP estimated growth may be above 5%, signaling that inflationary expectations are still strong.

The market will likely turn broadly positive when expectations are that interest rate hikes are over – and lower rates may be around the corner.

In the October Issue of Cabot Early Opportunities, I dig into a group of software companies that have upside potential from AI, automation and security. I also feature a diversified bioprocessing and advanced materials company that’s drawing attention right now and go deeper into a very small industrial company that few investors have ever heard of.

As always, there’s something for everybody!

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

The story remains mostly the same in the market as it has for the past few weeks: The intermediate-term trend for nearly all major indexes and the vast majority of individual stocks is pointed down. That said, there also are a decent number of stocks holding up fairly well—and with earnings season starting in a major way this week, the potential is there for some leadership to develop if we see some strong upside gaps following reports. We’re all for it happening, but overall it’s best to remain cautious as the market attempts to turn the corner. Once again, we’ll leave our Market Monitor at a level 5.

This week’s list has a wide array of good-looking names, though for our Top Pick we’re going with a liquid leader that, while not in the first inning of its run, acts like it wants to go higher.

Stocks are showing signs of strength as we dive head-first into third-quarter earnings season. Will the latest round of company reports give markets the nudge they need to enter their first substantive rally since mid-summer? Or will they douse the rally with cold water before it really even begins? We’ll have our answer soon. In the meantime, in case it’s the latter, today we add a reliable dividend payer that’s been gaining traction thanks to the restored global supply chain. It’s a brand-new recommendation from Cabot Dividend Investor’s Tom Hutchinson.

Details inside.

We added a November 17, 2023, bull put spread in SPY last week, which gives us three positions. The addition of our bull put spread essentially forms another iron condor, although I will be managing the bear call spread and bull put spread in SPY separately.

Expiration is upon us, and three of our six positions are due to expire this week.

I plan to buy back our calls in WFC, as they are essentially worthless, lock in some profits and immediately sell more call premium.

As for our GDX covered call position, the current probability is basically 50%, so we are in coin toss territory. I’ll update my thoughts on the position, with any necessary alerts, as the week progresses.

Earnings season kicked off late last week with the big banks leading the way. We decided to place our first trade of the season in JPMorgan Chase (JPM) by using a 14.5-point range, with our short strikes at 152.5 and 138. We felt comfortable with the range as it was not only well outside of the expected range (141 – 151) for JPM, but covered, on a percentage basis, all earnings moves going back to October 2006. These are the type of setups we prefer to trade.

What a difference a few weeks can make. The S&P 500 has moved up 15% from the low of October. Have we turned the corner on this bear market?

The main catalyst is a slower-than-expected inflation report. While still unacceptably high, inflation showed real signs of slowing in October. That means the Fed could be done hiking rates sooner. The chief cause of this bear market, rising inflation and a hawkish Fed, show signs of abatement.

It’s a furious rally. The market is on fire. Last week’s inflation report ignited a surge that might last longer. Let the good times roll (for now).


October inflation numbers were reported last week and both top-line CPI and core inflation numbers were lower than expected. It reignited hope among investors that inflation has peaked and is on the decline and the Fed will stop raising rates sooner than previously expected.

Following our demoralized and never-changing, four-word question of “are we there yet” came worthless responses like “soon enough,” or “sometime later,” “we’re getting closer.”

This week’s update includes commentary on earnings from Adient (ADNT), Berkshire Hathaway (BRK/B), Brookfield Reinsurance (BAMR), Elanco Animal Health (ELAN), TreeHouse Foods (THS), Viatris (VTRS) and ZimVie (ZIMV).

The market boomed today after a tamer-than-expected inflation report, with the Dow exploding higher by nearly 1,200 points (3.7%) and the Nasdaq surging 761 points (7.3%).

This week the cryptocurrency market is in absolute turmoil as one of the biggest exchanges, FTX, is insolvent. This is bleeding into equity markets too.

It’s been a tough market for covered calls. Although the market has rallied off the low, call premiums are subdued because investors are less willing to bet on higher prices in the future with still high inflation, a hawkish Fed, and a looming recession.

Many of the more successful positions were called away at options expiration as they exceeded the strike price. But in hindsight it was beneficial to take those profits as well as generate a high income. Many of the remaining portfolio positions left are more cyclical stocks that have fallen below the purchase price. Several more defensive positions have since been added to the portfolio.

Well over two decades ago, I oversaw the investment strategy for a large branch office of a major investment management firm. Our clients were flush with gains from a decade of tech mania – and highly reluctant to shift from their winning strategy. A major challenge was convincing clients to stay invested in stocks but step aside from high-flying dot-com stocks.

This week’s update includes commentary on earnings from Conduent (CNDT), ESAB (ESAB), Gannett (GCI), Goodyear Tire & Rubber (GT), Holcim (HCMLY), Ironwood Pharmaceuticals (IRWD), Kaman (KAMN), Molson Coors (TAP), Organon (OGN), Volkswagen (VWAGY), Warner Bros Discovery (WBD) and Western Union (WU).

Seatmaker Adient (ADNT) reported this morning with encouraging results – we’ll include more detailed commentary next week.

Next week, TreeHouse Foods (THS), Viatris (VTRS), Elanco Animal Health (ELAN), ZimVie (ZIMV), Brookfield Re (BAMR) and Toshiba (TOSYY) report earnings.

Centrus Energy (LEU) was steady this week as Congress seeks another $1.5 billion in a government funding bill to boost domestic supply of uranium to offset lost Russian fuel.

Ford (F) shares rose 7% this week as its October U.S. sales declined by 10% but electric vehicle (EV) sales rose nearly 120% year over year. It now claims to be the #2 EV seller in America behind Tesla.

With only 16 days left and quite a few important data points being released over the next week or so, I’ve decided to take off our iron condor in IWM for a small profit. I will be reestablishing a new iron condor most likely tomorrow or Monday for the October expiration cycle. If you choose to hold on, please be aware of the risks.

I plan on rolling several more of our short call positions, EFA and EEM to name a few, over the next two days. But today, I want to go ahead and roll our CVX and DBC calls. I also plan on adding several new positions to our Growth/Value Portfolio and Buffett Portfolio. Stay tuned!

Our BITO 16.5 calls for the September 23, 2022, expiration cycle are essentially worthless. Same goes for our GDX 28 calls.

Today, given the extreme oversold readings, I’m going to open a position in the Nasdaq 100 ETF (QQQ), more specifically a bull put spread. I also intend on adding several more positions for the October 21 expiration cycle over the coming days.

I will be rolling several more of our short calls at the beginning of next week. Stay tuned as I will be sending out several trade alerts on Tuesday and Wednesday.

The market today is like fertilizer for grey hair. In theory, it should be stronger than it has been. After all, this morning’s manufacturing data showed prices continue to come down (i.e., supply/demand balance getting better) while new orders remain stable. We also see oil prices down. So, inflation pressures seem to be easing (still) but growth isn’t tanking (yet).

We currently own the TLT January 19, 2024, 85 call LEAPS contract at $29.10. You must own LEAPS in order to use this strategy.

We currently own the GLD January 19, 2024, 145 call LEAPS contract at $37.00. You must own LEAPS in order to use this strategy.

Several of the short calls in our poor man’s covered call positions have little to no value due to the sharp decline that began in earnest last Friday. As a result, I want to buy back several of our short call positions and sell more premium while volatility is high. I’m going to start with SPY, but expect to see more alerts before we close out the week.

The market’s rally continues to take on water, and while it’s not a wipeout, many of our intermediate-term indicators are back on the fence.

With 18 days left and little to no value left in our bear call spread, I have decided to take all risk off the table, lock in profits and move on to the next opportunity.

oday, we are moving shares of Lamb Weston Holdings (LW) from Buy to Sell.

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.