Issues
The market’s traditional “spooky season” is here, and stocks are dutifully selling off as they normally do the first week of September. The selling could last a few days or a few weeks. But on the other side of it, there will be big buying opportunities. Until then, let’s try and limit the damage, which we do in today’s issue by selling off one underperformer that’s taken a beating after an underwhelming earnings report and buying a deep value consumer staple that’s too oversold. It’s a stock Clif Droke recommended to his Cabot Turnaround Letter audience last week, and we follow suit here today.
Details inside.
Details inside.
Despite two big potential market-moving events (NVDA earnings and PCE inflation data) the S&P 500, Dow and Nasdaq all finished the week mostly unchanged to marginally lower, while the Russell 2000 (IWM) rose marginally.
Despite two big potential market-moving events (NVDA earnings and PCE inflation data) the S&P 500, Dow and Nasdaq all finished the week mostly unchanged to marginally lower, while the Russell 2000 (IWM) rose marginally.
“Only the paranoid survive.” -Andy Grove
Nvidia (NVDA) met high expectations yesterday for the July quarter, hitting $46.7 billion in revenue, up 56% from the year-earlier period. However, it cautioned that third-quarter revenue growth will not be as impressive, disappointing analysts and investors.
Explorer stocks did not disappoint this week, with many of our positions posting solid gains. Coeur Mining (CDE) shares continue to outperform for us, up 8.9% this week, and Dutch Bros (BROS) shares were up a stellar 16.3%.
Nvidia (NVDA) met high expectations yesterday for the July quarter, hitting $46.7 billion in revenue, up 56% from the year-earlier period. However, it cautioned that third-quarter revenue growth will not be as impressive, disappointing analysts and investors.
Explorer stocks did not disappoint this week, with many of our positions posting solid gains. Coeur Mining (CDE) shares continue to outperform for us, up 8.9% this week, and Dutch Bros (BROS) shares were up a stellar 16.3%.
Cannabis investors continue to await action by the Trump administration on rescheduling, the next potential major catalyst for the group.
In an August 11 news conference, President Donald Trump said that he’s still considering the change and he will have a decision within a few weeks.
I believe Trump will follow through on his promise to reschedule, but this is not a 100% certainty. The most likely outcome, in my view, is that the Department of Justice will cancel a planned rescheduling hearing and issue a final rule with a public comment period.
In an August 11 news conference, President Donald Trump said that he’s still considering the change and he will have a decision within a few weeks.
I believe Trump will follow through on his promise to reschedule, but this is not a 100% certainty. The most likely outcome, in my view, is that the Department of Justice will cancel a planned rescheduling hearing and issue a final rule with a public comment period.
As you’ve probably surmised by now, I’m not the world’s biggest fan of buying stocks that are coming off fresh 52-week lows, preferring instead those that have carved out a decent bottoming pattern—both in terms of price and sentiment. Nor, for that matter, do I tend to favor buying stocks that are so far out of favor with investors that continued selling pressure is still an ever-present possibility.
But sometimes a stock becomes so cheap, so out of favor and so “wound up” with short interest and capitulation that the temptation to do some bottom fishing is simply too great to pass up. This is especially the case when the turnaround story is so compelling that it practically writes itself. Such is the case with this month’s featured recommendation, Helen of Troy (HELE).
But sometimes a stock becomes so cheap, so out of favor and so “wound up” with short interest and capitulation that the temptation to do some bottom fishing is simply too great to pass up. This is especially the case when the turnaround story is so compelling that it practically writes itself. Such is the case with this month’s featured recommendation, Helen of Troy (HELE).
What will sobered-up investors see after Labor Day when they start really paying attention again?
Although a September rate cut is largely priced into stocks, upcoming inflation and economic reports could change things. September could be a month when the AI rally is renewed and the Fed starts cutting rates, or a month where tech stocks retreat and the rate cut promise is pulled back. It’s a precarious market for stocks priced near the high.
Fortunately, there are several good stocks that are already well off the high. One area is those companies exposed to homebuying. Stubbornly high mortgage rates have held company stock prices down. But the longer-term trajectory for the homebuying market is fabulous. There is huge pent-up demand for homebuying that will ignite at some point. If rates come down in the months ahead, that ignition could occur sooner rather than later.
Several homebuilding company stocks have already spiked higher on the prospect of falling interest rates. In this issue, I highlight a title insurance company stock that has a long history of market outperformance. It is still priced well off the high, while the longer-term prospects are stellar, and it might be on the cusp of a breakout in the short term.
Although a September rate cut is largely priced into stocks, upcoming inflation and economic reports could change things. September could be a month when the AI rally is renewed and the Fed starts cutting rates, or a month where tech stocks retreat and the rate cut promise is pulled back. It’s a precarious market for stocks priced near the high.
Fortunately, there are several good stocks that are already well off the high. One area is those companies exposed to homebuying. Stubbornly high mortgage rates have held company stock prices down. But the longer-term trajectory for the homebuying market is fabulous. There is huge pent-up demand for homebuying that will ignite at some point. If rates come down in the months ahead, that ignition could occur sooner rather than later.
Several homebuilding company stocks have already spiked higher on the prospect of falling interest rates. In this issue, I highlight a title insurance company stock that has a long history of market outperformance. It is still priced well off the high, while the longer-term prospects are stellar, and it might be on the cusp of a breakout in the short term.
*Note: Your next issue of Cabot Profit Booster will arrive next Wednesday, September 3, due to the market holiday next Monday, September 1, in observance of Labor Day.
While it was a highly volatile week that included the AI story coming under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week that included the AI story coming under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
*Note: Your next issue of Cabot Top Ten Trader will arrive next Tuesday, September 2, due to the market holiday next Monday, September 1, in observance of Labor Day.
Ever since early July, the market has seen more and more bouts of rotation, and in the past two weeks, that action has accelerated, with more and more growth stocks getting hit while expectations for a Fed rate cut next month have goosed the broad market. So where do we stand overall? From a top-down perspective, the evidence has improved, but there’s also a lot of crosscurrents and leadership is in transition, which keeps things tricky. We’ll stick with our Market Monitor at a level 7 and see how things look after the coming long weekend.
This week’s list has a bunch of names from different groups, including many smaller titles, which goes hand in hand with what we’re seeing in the market. Our Top Pick had five (!) fakeouts in the past six months, this recent breakout look for real. Aim for modest dips and use a looser stop.
Ever since early July, the market has seen more and more bouts of rotation, and in the past two weeks, that action has accelerated, with more and more growth stocks getting hit while expectations for a Fed rate cut next month have goosed the broad market. So where do we stand overall? From a top-down perspective, the evidence has improved, but there’s also a lot of crosscurrents and leadership is in transition, which keeps things tricky. We’ll stick with our Market Monitor at a level 7 and see how things look after the coming long weekend.
This week’s list has a bunch of names from different groups, including many smaller titles, which goes hand in hand with what we’re seeing in the market. Our Top Pick had five (!) fakeouts in the past six months, this recent breakout look for real. Aim for modest dips and use a looser stop.
Jerome Powell was an unlikely hero to investors last week, reviving an increasingly sluggish market with his surprisingly dovish words from Jackson Hole last Friday. So stocks remain near record highs, and volatility is low, as the prospect of the Fed finally slashing interest rates again starting next month becomes increasingly realistic. Lower interest rates are particularly enticing for housing stocks, a beaten-down sector in the face of sky-high mortgage rates in recent years. So today, we add a high-profile homebuilder that’s starting to gather momentum – enough to catch the attention of Cabot Top Ten Trader Chief Analyst Mike Cintolo.
Details inside.
Details inside.
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, September 2 due to the market holiday next Monday, September 1 in observance of Labor Day.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
*Note: Your next issue of Cabot Options Trader Pro will arrive next Tuesday, September 2 due to the market holiday next Monday, September 1 in observance of Labor Day.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
While it was a highly volatile week, which saw the AI story come under intense pressure, buoyed by the Fed Chairman’s dovish speech on Friday the S&P 500 closed the week at a new all-time high. By week’s end the S&P 500 had gained 0.3%, the Dow had rallied 1.5% and the Nasdaq had fallen 0.6%.
Updates
The Trump administration’s apparent effort to de-escalate its tariff war with China has been meet with statements from Chinese officials saying there are no ongoing trade talks with the U.S. and that all pronouncements of progress in negotiation are groundless.
Still, the market has begun to factor in a “less bad” outcome than was being contemplated last week.
It has helped significantly that Trump backed away from what seemed like a very clear desire to fire Fed Chair Jerome Powell, which caused another spike in market panic last week.
Still, the market has begun to factor in a “less bad” outcome than was being contemplated last week.
It has helped significantly that Trump backed away from what seemed like a very clear desire to fire Fed Chair Jerome Powell, which caused another spike in market panic last week.
The market took a turn for the better this week as President Trump backed off his criticisms of Fed Chairman Jerome Powell and indicated there may be some wiggle room on his sky-high tariffs on China. Those served as a sigh of relief for investors, and stocks surged on Tuesday and Wednesday, though the S&P 500 is only up about 1% since we last wrote.
Stocks are still below their April highs, and down more than 8.5% year to date, but volatility is declining and it seems increasingly possible that a bottom was formed in early April.
Stocks are still below their April highs, and down more than 8.5% year to date, but volatility is declining and it seems increasingly possible that a bottom was formed in early April.
The wild ride continues. After a crazy first few weeks of April, this week has continued in the same vein, with a big down day on Monday and a big up day on Tuesday. This might last a while longer.
It’s been a tough market. The S&P started this week down about 6% for the month of April, over 10% YTD, and over 14% from the high. And that was before Monday’s selloff. It is entirely possible that the market falls back to a new low and an official bear market.
It’s been a tough market. The S&P started this week down about 6% for the month of April, over 10% YTD, and over 14% from the high. And that was before Monday’s selloff. It is entirely possible that the market falls back to a new low and an official bear market.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), Kenvue (KVUE), Pan American Silver (PAAS), Sirius XM Holdings (SIRI) and Toast (TOST).
Precious metals miners Agnico Eagle Mines (AEM) and Pan American Silver (PAAS) continue to lead the portfolio after making yet another series of new highs this week.
Precious metals miners Agnico Eagle Mines (AEM) and Pan American Silver (PAAS) continue to lead the portfolio after making yet another series of new highs this week.
The big macro development of the week is that the Fed is in no rush to rescue the market or the economy.
Speaking yesterday at the Economic Club of Chicago, Fed Chair Jerome Powell sounded a hawkish tune. While he acknowledged that the level of tariff increases announced on Liberation Day is much higher that what was expected, and will likely lead to higher inflation and slower growth (i.e. the dreaded stagflation), he said the Fed is well positioned to wait for greater clarity before considering any adjustments to policy.
Speaking yesterday at the Economic Club of Chicago, Fed Chair Jerome Powell sounded a hawkish tune. While he acknowledged that the level of tariff increases announced on Liberation Day is much higher that what was expected, and will likely lead to higher inflation and slower growth (i.e. the dreaded stagflation), he said the Fed is well positioned to wait for greater clarity before considering any adjustments to policy.
As markets weigh tariff and trade risks, we will continue our efforts to protect assets through portfolio rebalancing while remaining alert to trading opportunities. Our diversified and global Explorer stocks are doing well.
International investors will be important at the margin since they account for 18% of U.S. stock ownership.
The retreat of the U.S. dollar, down 10% in the last six months, and the emerging premium for U.S. bond markets is leading to higher yields (interest rates).
International investors will be important at the margin since they account for 18% of U.S. stock ownership.
The retreat of the U.S. dollar, down 10% in the last six months, and the emerging premium for U.S. bond markets is leading to higher yields (interest rates).
Regardless of your politics, “calm” is not a word you would likely use to describe the stock market under President Trump, at least through the first three months of his second term. But given the extreme tariff-fueled volatility that pervaded this time a week ago, that’s exactly how the last week has felt for investors: calm.
The market has recovered in a big and fast way over the past week. Are we out of the woods?
What a difference a week makes. Things were frog ugly at the beginning of last week. We were approaching a trade war with the whole world. The S&P 500 came within a whisker of bear market territory (down 20% or more from the high on a closing basis). In fact, it hit the 20% mark down from the high on an intraday basis twice. Then last Wednesday happened.
What a difference a week makes. Things were frog ugly at the beginning of last week. We were approaching a trade war with the whole world. The S&P 500 came within a whisker of bear market territory (down 20% or more from the high on a closing basis). In fact, it hit the 20% mark down from the high on an intraday basis twice. Then last Wednesday happened.
The market got a reprieve last week. But we’re probably not out of the woods yet.
The S&P 500 came about as close to a bear market as you can get early last week. In fact, it hit the 20% mark down from the high on an intraday basis twice. But it’s not an official bear market until the closing price falls below 20%. The S&P seemed to have one foot on a bear market and the other foot on a banana peel. Then last Wednesday happened.
The S&P 500 came about as close to a bear market as you can get early last week. In fact, it hit the 20% mark down from the high on an intraday basis twice. But it’s not an official bear market until the closing price falls below 20%. The S&P seemed to have one foot on a bear market and the other foot on a banana peel. Then last Wednesday happened.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Centuri Holdings (CTRI), GE Aerospace (GE), Paramount Global (PARA), SLB Ltd. (SLB), Teladoc Health (TDOC) and UiPath (PATH).
Gold miner Agnico Eagle Mines (AEM) continues to lead the portfolio after making a new record high on Thursday.
The U.S. natural gas outlook should prove supportive for SLB Ltd. (SLB).
Gold miner Agnico Eagle Mines (AEM) continues to lead the portfolio after making a new record high on Thursday.
The U.S. natural gas outlook should prove supportive for SLB Ltd. (SLB).
WHAT TO DO NOW: Remain defensive, but keep your eyes open. Yesterday’s rally was noteworthy and may have started (or will soon start) a process of repairing the damage from the recent selling. That said, the market’s trends are still down and few stocks are in great shape, so the odds favor the repair process taking some time. Of course, we’re flexible, so if the buyers go wild, we’ll act, but tonight we’re again standing pat and seeing how this bounce plays out. Our cash position remains near 87%.
Where to begin.
Let’s start here. I think the idea that the Trump administration had a perfectly executed strategy that included tanking the global equity markets and sending the bond market into utter chaos, to get to the point of announcing 10% tariffs across the board as a major “win,” excluding China, is a stretch.
Let’s start here. I think the idea that the Trump administration had a perfectly executed strategy that included tanking the global equity markets and sending the bond market into utter chaos, to get to the point of announcing 10% tariffs across the board as a major “win,” excluding China, is a stretch.
Alerts
Varonis (VRNS) Moves to Sell. MSFT, FTAI, AAPL, SN up next.
Shares of our silicon battery startup Enovix (ENVX) are trading up nicely today after the company reported Q3 results after the close yesterday. Lots to cover here so I’ll bullet point the most relevant stuff then give my two cents:
We went into the TransMedics (TMDX) Q3 earnings report yesterday afternoon with a quarter of our original position and lingering questions about the underlying trends in the business.
Sell Veralto (VLTO); Note on Rivian (RIVN); AST Spacemobile (ASTS) Taking off
Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
Portfolios
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
Strategy
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.