This year’s strong market has surprised most pundits. Hopefully, the good times last. Anything is possible.

I don’t want to get into the business of trying to predict what the market will do over the rest of the year. Even if you get things right, some stupid headline can come out of nowhere and change all the math. There’s a much better way than market timing.

Buying good stocks cheap is perhaps the best way to assure good returns over time. Different market sectors go in and out of favor all the time. Technology stocks were out of favor at the beginning of this year. No one wanted energy stocks at the beginning of 2021.

You may not think there are a lot of bargains anymore. Sure, it’s a bull market for the indexes. But it is still the darkest days of the bear market in certain places. Defensive stocks in utilities and other sectors are wallowing near the lows of last October while the indexes are whooping it up.

In this issue, I highlight three defensive portfolio positions. These stocks are all selling near 52-week lows and, in some cases, multi-year lows. But operational results at these companies have been as strong as ever. And all these currently out-of-favor stocks have long histories of superstar performance that blows away the returns of the overall market.

Forget the Fed, and inflation, or the velocity of the landing. Buying some of the very best dividend stocks on the market near the lowest valuation at which they ever sell should be a money-making strategy regardless of what happens with all that other stuff.

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.

Some of the positives that we saw in the latter half of August are still hanging around, not the least of which is a good amount of resilience from growth stocks that popped higher on earnings or otherwise saw good-volume buying. That said, the market as a whole doesn’t look ready, with last week bringing another round of selling in the broad market and the major indexes—the intermediate-term trend never could turn up, and few stocks are really moving up at this point. Long story short, there are some encouraging pieces of evidence, but more patience is likely needed. We’ll leave our Market Monitor at a level 6.

This week’s list is pretty well-rounded, with stocks from a variety of groups and of different sizes and profiles. Our Top Pick is a clear winner in the drug space with two big sellers; we’re OK grabbing a few shares here or (preferably) on dips.

Stocks took a predictable early-September hit last week, but the damage was minimal, and it appears the indexes want to go up – pending the results of this Wednesday’s inflation data, of course. Chinese stocks, meanwhile, haven’t gone anywhere but down for a while, but today we take a contrarian view by adding a big-brand Chinese company that Carl Delfeld just added to his Cabot Explorer portfolio. Sure, China’s economy has underwhelmed, but that’s not likely to be the case for long. And today’s addition is poised to lead China’s recovery.



Details inside.

The earnings doldrums are upon us, but we still have a few potential opportunities this week, most notably a chance for a trade in Oracle (ORCL). The company is due to announce after the closing bell today, so if a trade alert is sent, expect to see the alert around 2 p.m. ET.

The beginning of this week is going to be busy as I plan to buy back positions in DKNG, PFE and KO, lock in profits and immediately sell more options premium.

Our other positions are working through their respective expiration cycles using our “income wheel” approach. That being said, we do have one position, WFC September 15, 2023 45 puts, that will most likely close in-the-money at expiration this Friday. If that does occur, no worries, we will be assigned shares of WFC (100 per options contract) and immediately begin the covered call portion of our “income wheel” strategy.

We added another trade to the mix this past week and thankfully, at least so far, both our current trades are in profitable territory. We have the ability to take our SPY iron condor off the table for just over 8% and with 40 days left until expiration, it might not be a bad decision to lock in those profits. As for our IWM iron condor, we are early in the trade, and even though we have a chance to lock in some early profits, those profits are minuscule at the moment, so we will continue to hold in hopes of taking the trade off the table (for profits) over the next two to three weeks. Our total profits are just over 150% and the hope is we can add another 15% to 20% prior to the next expiration cycle.

The market rally in 2023 and recent pullback have left the All-Weather portfolio up a respectable 6.5%, with the Vanguard Total Stock Market ETF (VTI) continuing to do the heavy lifting, up 25.2%.

Nothing has changed from last expiration cycle, both bond funds (TLT and IEF) and the commodity fund (DBC) continue to lag behind, but that is the yin-yang protective nature of the All-Weather portfolio just doing its job. That being said, all of our positions are outperforming their respective ETF benchmarks, once again showing the power of using a poor man’s covered call approach.

Partially aided by declines in mega-cap technology stocks Apple (AAPL) and Nvidia (NVDA), both of which lost 6% last week, the holiday-shortened week was not particularly kind to the bulls as the S&P 500 fell 1.3%, the Dow lost 0.75%, and the Nasdaq declined by 2% last week.

Partially aided by declines in mega-cap technology stocks Apple (AAPL) and Nvidia (NVDA), both of which lost 6% last week, the holiday-shortened week was not particularly kind to the bulls as the S&P 500 fell 1.3%, the Dow lost 0.75%, and the Nasdaq declined by 2% last week.

The market showed some promise in the past couple of weeks, but our indicators never could turn up and now the sellers are back at it, driving the broad market back down. All in all, then, the correction that started in earnest in early August remains in place, so we’re remaining relatively cautious. To be fair, there are some positives, not the least of which is growth stocks, many of which reacted well to earnings last week and a bunch have been resilient of late. That’s not enough to start a buying spree, but it’s another sign that there should be fresh leadership to sink our teeth into whenever the correction finishes up.

In tonight’s issue, we talk about one fundamental transition that three potential leaders are in the midst of, review our Growth Tides and go over a bunch of enticing candidates, be them cyclical or growth stocks.

China’s economy is struggling due to lackluster growth, falling property prices, high local debt, poor demographic trends, and lack of consumer confidence. In some ways, my thought is – join the club. The U.S. may be facing 2% GDP growth and has its own challenges such as excessive federal spending and national debt. My point is that we should remain skeptical but not discount China coming back strong with the right policies. In my view, China is both strong and brittle. And today, we add a high-profile stock that’s a play on China’s strength.

ENS domains are now the top traded NFT collection, according to the leading NFT marketplace OpenSea.

ENS (Ethereum Name Service) trading volume is rising at a 43% week-over-week clip despite other NFT projects falling in value.

While metals like lithium and uranium remain buoyant, gold is still in the proverbial doghouse despite having several good reasons to strengthen. This consideration has prompted investors to wonder what exactly it will take to turn the yellow metal around.

This note includes our review of earnings from Duluth Holdings (DLTH), the Catalyst Report and a summary of the September edition of the Cabot Turnaround Letter, which was published on Wednesday.

Some bad news surrounding many chip firms had the market down decently today, though the buyers did support stocks as the day wore on. At the close, the Dow was up 146 points, though the Nasdaq still finished lower by 31 points.

The strong 17% market rally is over. The S&P 500 is down 7.4% in the second half of August. And here comes Labor Day.

Sobered-up investors start paying attention again after Labor Day. And they can be cranky. That’s why September is historically the worst-performing month. Refocused investors probably won’t like what they see this year.

The optimism of the two months after the June low has faded.

In American football, most quarterbacks are right-handed. So, when they drop back to pass, they typically turn their backs to the left side of the line of scrimmage. They are essentially blind to what happens behind them. If the offensive line is weak, the quarterback is vulnerable to a potentially devastating hit, risking not only that particular play but also possession of the ball and possibly serious injury.

We’re not buying or selling any positions with this update. We are, however, going to recommend converting REE warrants to shares under a company tender. More below.

After a very strong summer rally, the S&P 500 has pulled back sharply.
The cause for concern appears to be Jerome Powell’s guidance from his speech last Friday.

The market has turned south again. And things could be worse in September.

Blame the Fed. Blame inflation. Blame recession. Investors can’t look past them anymore. The market had rallied on hopes that inflation peaked, and the Fed will be all done hiking rates by the beginning of next year. But the Fed poured cold water on those hopes.



The end of this Fed hiking cycle is no longer in view after the recent hawkish statements by the Central Bank. The Fed indicated again last week that it is willing to induce a deeper recession to conquer this inflation. Rates may continue to rise well into next year and investors can’t see the light at the end of this tunnel anymore.

Following the fed summit at Jackson Hole, global markets retreated as investors try to understand the pace of interest rate increases.

Interest represents the time value of money. Borrowers rent money and pay interest for its use.

Gold and silver remain laggards in the broad metals market (no surprise there!). Thankfully for investors, however, other industrial metals are starting to strengthen after the setbacks of recent months and are picking up the slack in the precious metals market.

This note includes our review of earnings from Macy’s (M). Next week, Duluth Holdings (DLTH) reports earnings.

We’re going to take profits on Archaea Energy (LFG) today, after shares tripped our stop-loss of ‘under 20’ with a close at 19.80 Monday. We should book a profit of around 8%. There is more support for LFG below here, particularly at 18.70, but with sectors broadly breaking support levels yesterday, we prefer to get out with a profit now.

They say markets don’t bottom on a Friday. Today’s weakness is showing that old adage to be true yet again.

Sell Silvergate Capital (SI)

The market’s implosion is continuing today, with the indexes hitting new lows and many individual stocks in freefall. The selling is getting emotional, and the conditions are in place for some sort of low in the market soon, but those secondary indicators have had no effect in recent days.

Our stop-loss mark on Advanced Water Systems (WMS) was tripped Friday, and with its weaker open today, we’re recommending selling.

As we march toward a well-deserved weekend, the market is looking to hold support (S&P 500 holding up so far while Nasdaq has cracked a little). There’s no sugarcoating it – this has been a horrific week. But if there is a glass half full perspective it’s that when everybody is bearish it just might be time to start buying.

Procept BioRobotics (PRCT) delivered another “beat and raise” quarter after the close yesterday (third since going public) with revenue up 97% to $14.2 million ($2.1 million beat) and GAAP EPS of -$0.39 beating by $0.10.
Pretty much everything was good, starting with a $4 million increase to full-year guidance, which now sits at $58 - $62 million (+68% - 80%). Hospitals report second and third urologists are starting to use systems (i.e., expansion within hospitals) and also using the robots on smaller prostates (i.e., market expansion). In some cases, Aquablation is becoming the standard of care.

The shine from the Fed’s press conference yesterday came off early this morning and it’s turned into an ugly day. It’s another one of those days (we’ve had too many this year) where it feels wrong to be a buyer and wrong to be a seller. Classic bear market.

The market is mostly down this morning, but its growth stocks that are again unraveling—as of 11:15 am EST, the Dow is up 18 points, but the Nasdaq is down 173 points and growth funds are down much more than that.

Revolve (RVLV) beat on both the top and bottom lines. Revenue of $283.5 million was up 58% and beat by $26.7 million. GAAP EPS of $0.30 was flat with the year-ago quarter and beat estimates by $0.03, despite a 28% increase in the effective tax rate. Gross margin was up almost half a percentage point to a record 54.5% despite higher freight costs.

This morning we learned via an SEC filing that Shutterstock (SSTK) CEO Stan Pavlovsky has voluntarily resigned from his position as CEO and from the board of directors. He notified the company on April 27 and his resignation is effective today. The news was just made public today. The board has appointed current Executive Chairman and former CEO Jonathan Oringer as Interim CEO. Mr. Oringer was the founder of Shutterstock in 2003.

Silvergate Capital (SI) reported Q1 2022 results yesterday morning and held a conference call later in the day. Digesting the results took some time but at a high level the trends are very solid, despite a somewhat messy quarter for crypto markets. Here are the main bullet points.

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.