The continuation of the market sell-off led to another slow trading week as I decided it was best to simply sit on our hands.

As I stated in my Quant Trader advisory today, the investor’s fear gauge, otherwise known as the VIX, hit strong overhead resistance last week while simultaneously hitting a short-term overbought state. Typically, this type of situation leads to a reversion to the mean, especially in the few, reliable volatility products like the VIX.



The VIX hit 35 before pulling back the latter part of the week, even as the S&P 500 continued to plummet, another sign that sellers have exhausted themselves over the short-term. Which is why this week is pivotal for not only the VIX, but the market overall.

All three major U.S. indexes were up around 2% yesterday as the Bank of England stepped in to stabilize the pound, but the recovery looks fragile as sentiment remains mixed at best in the short term. Explorer stocks drifted lower this past week and we remain defensive looking for asymmetric plays where the upside potential exceeds downside risk.

Markets go up and down. Economies boom and bust. Investors get scared and they get greedy. But one of the few constants in an ever-changing investment landscape is the need for income. And investor demand for income is growing as the fastest growing segment of the population is 65 and older and retired.

The demand for the very best income stocks should remain strong. Also, during sideways and down markets, dividends account for most of the total market return. In problematic decades, dividends have almost completely offset market price declines.

It’s true that dividend stocks can still fall in a down market. But the long-term trend for the market is higher. History clearly shows that bear markets are the best time to get in cheap ahead of the next bull market. Meanwhile, dividends provide an income and less volatility while you wait.

Sentiment remains extremely negative towards the cannabis sector and the overall stock market.

You can look at this situation and get depressed. Or you can see it as an opportunity to buy cheaper shares for the long term. Being a contrarian, I prefer to do the latter. I think both cannabis stocks and the broad market are buyable right now. And that’s why I am adding two new positions to the Sector Xpress Cannabis Advisor portfolio today, and rate all our existing stocks “Buys.”

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the October 2022 issue.

As stock prices tumble under the twin pressures of rising interest rates and the likely arrival of an economic downturn, just about every new stock pick is destined to be a disappointment. How does one select stocks in such an environment? While most fresh ideas will be near-term duds, there is an important purpose to picking new ideas. And, one doesn’t need to buy full positions right away. We screen for low P/E stocks on depressed 2023 earnings, with estimates for those earnings that are increasing. These make good stocks in which to take starter positions.

We also sorted through stocks with high dividend yields and highlight two picks and two pans (with enticing yields yet have serious dividend risks).

Our feature recommendation this month is Dow (DOW). Its shares have been sold by fearful investors, but the company’s low valuation doesn’t recognize the improvements in its financial strength and cost structure since the dark days of early 2020, nor the attractive yet sustainable dividend yield.

Weakening economic indicators in the U.S., along with Covid-related shutdowns in China and economic woes in Europe, have converged to push prices for industrial metals lower. Gold and silver, meanwhile, have been caught up in the equity market downdraft produced by the Fed’s tightening monetary policy.

There are windows of opportunities ahead for both precious metals, however, including a potential recession-related safety bid for gold and an upcoming seasonal factor for silver.



In the trading portfolio, no new positions (save for a U.S. dollar ETF) are recommended for now as the broad metals market is still unsettled.

As central banks around the globe aggressively raised interest rates, the stock market had its second straight awful week of trading. The S&P 500 fell 4.6%, the Dow lost 4%, and the Nasdaq continued its ugly slide, falling another 5.1%.

As central banks around the globe aggressively raised interest rates, the stock market had its second straight awful week of trading. The S&P 500 fell 4.6%, the Dow lost 4%, and the Nasdaq continued its ugly slide, falling another 5.1%.

As central banks around the globe aggressively raised interest rates, the stock market had its second straight awful week of trading. The S&P 500 fell 4.6%, the Dow lost 4%, and the Nasdaq continued its ugly slide, falling another 5.1%.

We were assigned shares of WFC and KO. As a result, per our income cycle guidelines, we will begin the process of selling calls on both stocks shortly after the opening bell Monday.

Moreover, I plan on adding a new short-term position to the mix early next week. This will not be part of our income cycle portfolio; rather, it’s a short-term play to take advantage of the near-term pop in implied volatility that resides across the board.



Stay tuned for an alert or two over the coming days!

We’ve had a good start, with the Quant Trader service outperforming the market by a significant margin. Risk management has been a huge part of our success, mostly by locking in profits when we can lock in 50% to 75% of the original premium sold.

As a result, I decided on Friday (per the trade alert) to set a hard stop-loss for our IWM iron condor at $2.00. This will allow us to take all risk off the table and maintain overall profits in the portfolio, which speaks to the power of our approach as it has been a challenging environment for most investment strategies. Hopefully, the oversold state of IWM will lead to a push higher, giving us the ability to take a potential profit, but if not, we want to be fully prepared by taking off our trade, maintaining overall profits and patiently waiting for more opportunities to arise.

There’s not much to say when it comes to the market—the downturn that started in late August continues, with the major indexes back down to their May/June lows, keeping the intermediate- and longer-term trends pointed down. Moreover, after last week’s Fed meeting, the sellers finally came around for many resilient names, causing a bunch to crack support. Today, we’re staying cautious and continuing to hold plenty of cash, but we’re keeping an open mind as we see how this retest phase plays out. Our Market Monitor is down to a level 3.



This week’s list is mostly names that have taken on water (like everything else) but are still acting “normally.” Our Top Pick is a name that’s acting very unusually good, and it has a good story and excellent growth, too.

After a little volatility in the past couple of weeks, most of our recommendations are at or close to all-time highs. The S&P 500 is back to all-time highs. The NASDAQ Index, after pulling back ~11.0%, has rebounded sharply and is up ~8.0% in a little over a week. In times like these, it’s important to make sure we are checking the fundamentals to ensure our recommendations haven’t run ahead of fair value.

So much for the technology selloff. The sector dipped its toe into correction territory and has roared back with a vengeance.

The bull market in our turnaround stocks has pushed more names above their price targets. Many (most) of these companies continue to see their fundamentals improve while their valuations still look attractive enough to keep, so we are raising our price targets on six stocks today.

As promised in yesterday’s Special Bulletin today we’re looking past the big picture stuff to focus on our stocks. With one quick note … we just may have a three-day streak going! Yields have backed off and a lot of stocks from different sectors are clicking. Suffice to say, this is a welcome change for those of us with two feet in the growth stock pool.

In a bit of a reversal, tech stocks gyrated and industrial stocks jumped this past week. In particular, energy and financial stocks led the way as the Dow closed above 32,000 for the first time. Tech company stalwarts rebounded a bit yesterday but have been stung by the sharp pullback.

Although the S&P 500 index has gone sideways in recent weeks, there is a lot going on under the hood.

Each day brings something new. Some days every stock falls, other days they all surge, and some days, like Monday, undervalued stocks in the industrial, consumer and financial sectors jump (the Dow Jones Industrial Average gained 1%) while the Nasdaq slipped 2.4% - an enormous and historically unusual 3.4 percentage point gap, particularly as the indices went in opposite directions. Since February 12th, the Dow Jones Industrial Average has lifted by 1.1% while the Nasdaq has plunged by 10.5%, entering what the media call a correction.

Today’s note includes earnings updates, ratings changes and the podcast.

The sellers ran wild today, with the Dow losing 346 points, the Nasdaq falling 274 points (2.1%) and the average growth stock we own or watch down nearly 5%. From late January through late February, we began to see a change in character, with a string of wild up-down-up-down action in leading stocks—coming after a big run, that’s a sign the bears have begun to put up a fight. And now, at least when it comes to growth stocks, we’re seeing the result, with a ton of stocks cracking their intermediate-term uptrends and many coming unglued.

The market has gotten a little choppy and interest rates are to blame. At least, that’s what they say. The market indexes fell last week and have been all over the place so far this week.

Vaccines are being rolled out, and the economic recovery will be strong in 2021. Stocks that will benefit from the economic recover should have strong tailwinds. While our entire portfolio should benefit from an improving economy, two stand out to me.

After a rough week, the market is right back in business. Just when stocks appeared on the cusp of a deeper selloff, the S&P 500 started off this week with the best session since June.

The shares of this Real Estate Investment Trust were just upgraded to ‘Strong Buy’ at Raymond James and TD Securities to ‘Buy’. The shares have a current annual dividend yield of 3.02%, paid quarterly.

The top five holdings of this mutual fund are: UnitedHealth Group Inc (UNH, 5.85% of assets), Pfizer Inc (PFE, 5.52%), AstraZeneca PLC (AZN.L, 5.36%), Bristol-Myers Squibb Company (BMY, 4.23%), and Novartis AG (NOVN, 3.57%).

Profit of this rent-to-own company doubled last quarter, yet the shares look pretty undervalued. The company has a current annual dividend yield of 2.82%, paid quarterly.

It’s hard to say if this round of fun with Virgin Galactic (SPCE) is beginning to unwind or if the stock will be up 20% tomorrow (to pick a random number). However, judging by the action in many of the most speculative short squeeze stocks today (GME, NOK, AMC, etc.) there appears to be significant unloading today.

This commercial property Real Estate Investment Trust has a current annual dividend yield of 5.56%, paid monthly.

In recent days, several stocks recommended by Cabot analysts have rocketed to new highs, propelled by the twin forces of social media and short-covering, and our Virgin Galactic (SPCE) is one of them.

The market has been searching for direction this week and we’ve seen an uptick in “the crazy.” If you don’t know what I mean just Google “Short Squeeze GME” and read about the likely collective impact of retail investors teaming up on some stocks to put pressure on those with significant short interest.

From a top-down perspective, the market and our trend-following indicators are in fine shape, but we’re now seeing some big-picture yellow flags (tons of speculative activity) and, more important, growth stocks are beginning to look iffy. We’re not selling wholesale, but we do have a few tweaks today:

This auto parts supplier is expected to announce earnings on February 10, with EPS estimated at $5.08 per share, on revenues of $2.77 billion.

This recent IPO reports earnings on February 1, and analysts are forecasting annual growth of 45.86% over the next five years.

This semiconductor cleaning company earned $0.73 per share last quarter, beating analysts’ estimates by eight cents.

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.