Nothing has officially changed with our market timing indicators, so we remain in a very cautious stance, but the wear-you-out bear phase of the past couple of years (and the sharp declines of the past three months) has had many secondary indicators (breadth, sentiment, etc.) in high-reward positions, and this week’s strength is certainly intriguing. We’re not jumping the gun in any major way, but we are adding one half-sized position in a strong actor and have our antennae up to see if this rally can finally be the real deal.

In tonight’s issue, we review our remaining positions (most of which have popped nicely), our overall market thoughts (including some rays of light from our Two-Second Indicator) and go over many high-potential stocks should the bulls continue to press forward.

This month we’re adding a small company that specializes in the opaque and inefficient market for selling surplus and salvaged goods.

The company has a market cap of just $580 million and is growing revenue and EPS by double digits. It’s an interesting setup, especially as government agencies and corporations increasingly look to save money and achieve sustainability goals.

All the details are inside this month’s Issue.

The Federal Reserve yesterday maintained its benchmark interest rate while leaving the door open for further action as officials work to bring inflation back to the central bank’s 2% target. This makes sense, though markets are still a bit on edge as further increases are a possibility.

But today, we take a big swing with an aggressive stock that combines biotech with artificial intelligence - and is trading well off its highs.

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.

There’s not much new to say when it comes to the market—just about all of the primary evidence remains bearish, and interest rates are still in a firm uptrend, too. There are a growing number of secondary measures that are flashing green, effectively saying a solid bounce (and maybe more) should be coming soon. Thus, we’re staying alert and keeping a list of resilient stocks and sectors, but at the risk of repeating ourselves, we have to see the buyers show up for more than a few hours to start thinking investor perception is truly changing for the better. We’re leaving our Market Monitor at a level 4.

This week’s list has more than a few familiar names, including some initial earnings winners. Our Top Pick is a steady performer that also is showing great growth thanks to both of its top-selling brands—and the stock just emerged from nearly three months of chopping lower on its report. Try to buy on dips.

The indexes are hovering perilously above their May lows, with the S&P 500 and the Nasdaq entering correction territory (-10%) last week. And this week, we’ll hear from the Fed again (gulp), the October jobs report comes in, and we’re still in the heart of earnings season, with Apple (AAPL) being the headliner. Spooky season indeed!

To prepare for all scenarios, this week we’re selling out of a couple laggards and adding a well-known retailer that’s actually in an uptrend. Mike Cintolo recommended this retailer in Cabot Top Ten Trader last week, in fact.

Details inside.

There was little to no value left in the SPY 452/457 bear call spread, so we thought it was best to take our profits off the table and establish another bear call spread to protect our 408/403 bull put spread. One thing is certain: We will have to be nimble as we approach the November 17, 2023, expiration cycle. With only 18 days left until expiration, time decay is working in our favor. A short-term move to the upside, off oversold levels, should allow us to take our bull put spread off for a small profit. A rally should also “hopefully” lower implied volatility in SPY which should help our newly added bear call spread as well. As always, price action will be the final determinate.

We decided to place our third trade of the season in Mastercard (MA) by using a 47.5-point range, with our short strikes at 360 (puts) and 407.5 (calls). We felt comfortable with the range as it was not only well outside of the expected range (370 – 400) for MA, but covered, on a percentage basis, almost every earnings move going back to November 2011. These are the type of setups we prefer to trade.

As discussed over the past few weeks, we finally added the SPDR Utilities ETF (XLU) to the portfolio, which now gives us seven total income-producing positions. My goal is to have 8 to 10 positions, so we’re almost there. I plan to add another position this week, but I’ll be taking the opposite approach. I plan to add a stock or ETF with a little higher IV to give us the opportunity for greater options premium. As I’ve stated in the past, I like to diversify by not only using uncorrelated assets, but to use assets with varying levels of implied volatility.

There is no sugar coating it, the market had a very bad week as the S&P 500 fell 2.5%, the Dow lost 2.14% and the Nasdaq declined by 2.6%.

There is no sugar coating it, the market had a very bad week as the S&P 500 fell 2.5%, the Dow lost 2.14% and the Nasdaq declined by 2.6%.

Cannabis stocks are trading like a group in need of a catalyst.

* The AdvisorShares Pure U.S. Cannabis (MSOS) exchange traded fund (ETF) has fallen 28% from the peak of the rally caused by last summer’s news of federal government progress on rescheduling.

* The AdvisorShares MSOS 2x Daily (MSOX) ETF is down 38%.

Will the group see a catalyst soon? I put odds at much higher than 50%. This makes cannabis stocks a buy in the current retreat, both for a trade but also as a medium-term, multiyear position.

For our recommended stocks, earnings season starts next week, led off by Walgreens Boots Alliance (WBA) on Thursday, October 13 and Wells Fargo (WFC) on Friday, October 14. The following week Mattel (MAT) and Nokia (NOK) report earnings. The earnings deluge for our companies starts the following week on October 24.

Stocks struggled back from early losses yesterday after blue chips posted their biggest two-day gains in more than two years.

Explorer stocks had a good week with most up nicely and Infineon (IFFNY) up about 18%.

Perhaps the best indicator of where the U.S. and global economy is going are commodity prices. For example, copper prices are gaining ground though they are still far from highs reached earlier this year.

After an awful September and third quarter, the market roared back earlier this week on bad economic news.

A bad manufacturing and employment report indicative of a declining economy sent Treasury yields lower and stocks higher. The reason is that the sooner the economy rolls over the sooner the Fed will be done hiking and the sooner the market will recover. If we can just get on with a recession, this high inflation and aggressive Fed misery will end, and a new bull market can begin.

I love Twitter. The social media platform, not the stock.
While it’s easy to get lost “doom scrolling” on Twitter, I find it to be an incredibly helpful investment tool.

It’s been a furious rally so far this week. It’s only lunchtime on Tuesday. But I’ll take it.
September was an abysmal month, in a rotten third quarter, in an awful 2022. Investors can’t contend with persistent high inflation, a hawkish Fed, and a recession. The most recent selloff took just about every stock down with it.

There’s no disputing that gold has been one of this year’s most “boring” markets. What started as a promising New Year—with investors almost unanimously expecting inflation to skyrocket (thereby boosting gold’s appeal)—has mostly seen rising interest rates and a strengthening dollar consistently undermine interest in the metal.

The largest lender in the U.S. is now using blockchain. The bank also just announced they plan to hire about 2,000 more software developers worldwide by the end of the year according to Lori Beer, the chief information officer. JPM is making huge investments in computer science while other competitor financial institutions have lagged. JPM plans to spend $14 billion dollar on technology this year.

This note includes the Catalyst Report, a summary of the October edition of the Cabot Turnaround Letter, which was published on Wednesday, and bullet points of our podcast.

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.

Stocks are having another terrible day today, with investor fears building that the Fed will push the economy into a deep recession. As of 2:10 pm, the Dow is off 656 points and the Nasdaq is plunging 409 points.

The market tried to stage a small rally yesterday. But the combination of a consistently hawkish Fed, rising concerns of a global recession and increased risk of something going sideways in the financial markets (witness the Bank of England launching an emergency government bond buying program) is making it tough for the market to get off its knees. Stocks are selling off again today.

The market hit a new bear market low. That means that the summer rally was indeed just a bear market rally. And stocks may go lower.

Two things spooked investors, persistent inflation and a consequentially persistent Fed. After four Fed rate hikes, a bear market, and two straight quarters of negative GDP growth, inflation remains sky high and barely budging. The Fed will have to remain hawkish for longer.

The Fed insinuated that it is willing to drive the economy into recession, or deeper recession, to tame inflation. That makes it increasingly likely that only a hard landing can bring prices down. The economy is likely to weaken in the months ahead, dragging corporate earnings down with it.

Greentech is in a zone of support. While it has declined about 14% in the past two weeks, which is discouraging, we’re seeing buying coming in at current levels, where, technically, is an area we want to see bulls pushing back. Overall, the Greentech Timer is telling us to be cautious – it’s below all three of the moving averages we watch and on Friday, trading broke support from an earlier gap higher. The area of real concern for our sector would come with another 10% decline from today’s levels.

Today’s inflation data (CPI) wasn’t expected to be great but was even a little worse than anticipated as consumer prices rose 8.6%. That’s up from 8.5% in March and 8.3% in April. One can slice and dice the data a lot of ways but if you want to flag the main issues, they are probably energy and food prices.

I just wanted to give everyone a brief update that I’ve decided to wait until Monday to send out a trade alert for trades in the Vanguard Total Stock Market ETF (VTI) and iShares 20+ Year Treasury Bond ETF (TLT).

In today’s trade alert, like my last one, I want to start out by selling cash-secured puts with the intent of eventually wheeling into the position.
But I also want to place a trade that’s a bit more on the aggressive side as well. Some of you may be interested, others the opposite due to the underlying. But remember, we are trading statistics. The underlying is almost secondary. I’ll explain below.

Last Friday I sent out our first official trade alert in SPDR Gold Trust ETF (GLD).

We went through the trade step by step in hopes that you have a better understanding of the strategy. I plan on doing the same for our trades today, but the remainder of the trades going forward will be significantly shorter, focusing on the trade and the associated statistics.

Patience is a valuable attribute for sailors who are waiting for the wind to change. And patience is a key attribute for long-term investors. Investors who are impatient are the ones who sell at the bottom and then sit on the sidelines as stocks move back up.



So patience is what I continue to counsel for readers with losses in the stocks in our portfolio.

The SPDR S&P 500 Oil & Gas ETF (XOP) has pushed into an extreme overbought state. Typically when this type of extreme reading occurs the directional trend stalls or simply pulls back, at least momentarily.

Now, I know I don’t have the ability to consistently “guess” the direction a stock or ETF is headed over really any time frame. But what I can do is consistently wrap a high-probability strategy around an extreme in the market and offer myself an 80%+ probability of success on each trade I place.

We are moving shares of Marathon Oil (MRO) from Buy to Sell.

Today I’m going to start with one trade in the All-Weather portfolio. I’m going to go over it step by step, so we all have a good understanding of how a poor man’s covered call works. Typically, my alerts will not be nearly this long, but I want to make sure we are all on the same page before trades start to pick up.

I want to dip my toes into at least one position this week, with the intent of adding several more next week. My goal is to have a rotation of five to ten positions in both the Income Trades Portfolio and Income Wheel Portfolio.

In today’s trade alert, I want to start out by selling some puts with the intent of eventually wheeling into the position.

After a seven-week hiatus, the bulls finally made an appearance last week…and they roared back with vigor. The S&P 500 (SPY) managed to climb 6.6% last week alone. This week has been a little different as SPY seems to be consolidating after four straight days of rallying.

After dipping below 20% for a few days last month, the S&P is now only down 12.8% for the year. That being said, implied volatility, as seen through the VIX, continues to stay above normal levels.

Welcome everyone!

It’s a pleasure to have you all on board.



I hope all of you had the opportunity to read through the User Guide and the various reports on your subscriber page. If you haven’t, please take the time to read through them at your leisure so you have a decent understanding of our approach and the strategies we use … and more importantly how I approach risk management.

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.