Issues
Today’s addition is a small-cap networking company on the cusp of a potential multi-year growth cycle.
The big-picture growth catalyst? Emerging AI and cloud computing technologies that place new strategic importance on network infrastructure and security for data centers, hyperscalers and global enterprises.
All the details are inside this month’s Issue.
Enjoy!
The big-picture growth catalyst? Emerging AI and cloud computing technologies that place new strategic importance on network infrastructure and security for data centers, hyperscalers and global enterprises.
All the details are inside this month’s Issue.
Enjoy!
After a weekend that many feared would sink the market as the Middle East situation was flaring up, to the surprise of many, the market didn’t sell off and, in fact, by week’s end the S&P 500 had gained 3.4%, the Dow had rallied 3.8% and the Nasdaq added 4.2%.
Even as worries fade over the recent Middle East flare-up, new tariff-related headlines have lately crept back into the news. However, stocks have taken it in stride by ignoring what would normally be “bad” news. In view of this, we’re pleased with the market’s resilience—and it’s also welcome that it hasn’t become overheated with too much enthusiasm yet. We’re still seeing a few flies here and there, with some stocks having trouble breaking above resistance, but a growing number of stocks are joining the parade, with a nice mixture of growthy and cyclical names getting into sync with the general march forward. All told, we like what we’re seeing, and in view of the continued strength, we’re raising our Market Monitor to a level 8.
This week’s list features names across multiple industries, which we view as a sign that categorical strength is building. Our Top Pick is a sporting goods giant that has multiple growth tailwinds and is tightening up as the 25-day line has caught up. We’re fine entering here or (preferably) on a dip.
This week’s list features names across multiple industries, which we view as a sign that categorical strength is building. Our Top Pick is a sporting goods giant that has multiple growth tailwinds and is tightening up as the 25-day line has caught up. We’re fine entering here or (preferably) on a dip.
Chaos was the overriding theme of the first half of 2025. But for all the pearl-clutching over tariffs, Middle East conflict, slowing economic growth and still-high interest rates, the S&P 500 was up 5% and has risen to new all-time highs. Stocks have truly climbed the proverbial “Wall of Worry.” Will they continue to? I wouldn’t bet against it. So today, we add a once-great large-cap tech stock name that may finally be ready to dig out of a years-long funk. Clif Droke identified it as a prime turnaround candidate in his Cabot Turnaround Letter. Now, we add it to the Stock of the Week portfolio.
Details inside.
Details inside.
After a weekend that many feared would sink the market as the Middle East situation was flaring up, to the surprise of many, the market didn’t sell off and in fact by week’s end the S&P 500 had gained 3.4%, the Dow had rallied 3.8% and the Nasdaq added 4.2%.
After a weekend that many feared would sink the market as the Middle East situation was flaring up, to the surprise of many, the market didn’t sell off and in fact by week’s end the S&P 500 had gained 3.4%, the Dow had rallied 3.8% and the Nasdaq added 4.2%.
As we wind up the first half of the year, the market has a great setup in place—in fact, it’s looking like that’s what’s been going on for the past six or seven months, with the big-cap indexes etching their own launching pads. Combined with some big-picture positives (like still-dour sentiment), we continue to think the next big move is up. And, while it’s not completely decisive, we’re finally starting to see some growth stocks perk up, too. Thus, we’re taking another step into the market’s waters tonight, adding one new small position and averaging up on a current holding.
Cannabis stocks remain out of favor. It has been a long wait, but it is still too soon to give up on key federal reform that could help the sector and boost stocks. That’s the view of a top-five cannabis company CEO.
Meanwhile, states continue to make steady progress on legalization.
None of this should be a surprise. Polls consistently show that a majority of voters favor legalization. Many politicians at both the state and national levels are responding. Beyond polls, we see growing support for cannabis in consumer spending trends. Wallet share continues to rise. I provide more details on these trends below in the news roundup section.
Meanwhile, states continue to make steady progress on legalization.
None of this should be a surprise. Polls consistently show that a majority of voters favor legalization. Many politicians at both the state and national levels are responding. Beyond polls, we see growing support for cannabis in consumer spending trends. Wallet share continues to rise. I provide more details on these trends below in the news roundup section.
Few things are more enduring than America’s love of a good hamburger. Indeed, the iconic sandwich is so much a part of the country’s pop cultural heritage that, according to numerous opinion polls, it’s one of the first things foreigners mention when asked to name the most American symbol they can think of.
Stocks have been very resilient. The market has proven a lot of naysayers wrong. But prices are high, and uncertainty abounds.
Tariffs won’t be a disaster, but there will still be more headlines and uncertainty in the months ahead. The economy is okay, but it’s not great. Interest rates are still stubbornly high. And now the Iran conflict is thrown into the mix along with the tariffs and the economy. Meanwhile, the market indexes are hovering near the high and most stocks are pricey.
Several portfolio positions have had strong rallies in the recovery and are generating high call premiums. The high strike prices guarantee a strong total return if the stocks are called. The high premiums provide a great way to lock in the recent market good fortune by generating a high income from call premiums.
Let’s take what the market is giving. Right now, it’s giving a high income. Tomorrow, who knows? In this issue, I highlight a covered call in Qualcomm (QCOM). It is the sixth call sold on the position since the stock was added to the portfolio four years ago. It’s a great time to prime the pump for income once again.
Tariffs won’t be a disaster, but there will still be more headlines and uncertainty in the months ahead. The economy is okay, but it’s not great. Interest rates are still stubbornly high. And now the Iran conflict is thrown into the mix along with the tariffs and the economy. Meanwhile, the market indexes are hovering near the high and most stocks are pricey.
Several portfolio positions have had strong rallies in the recovery and are generating high call premiums. The high strike prices guarantee a strong total return if the stocks are called. The high premiums provide a great way to lock in the recent market good fortune by generating a high income from call premiums.
Let’s take what the market is giving. Right now, it’s giving a high income. Tomorrow, who knows? In this issue, I highlight a covered call in Qualcomm (QCOM). It is the sixth call sold on the position since the stock was added to the portfolio four years ago. It’s a great time to prime the pump for income once again.
The worries in the Middle East have continued to move markets in the last week, and despite some worrisome moments as well as signs of hope, the markets are little changed since we last wrote. The S&P 500 fell 0.2%, the Dow was virtually unchanged and the Nasdaq eked out a small gain.
The Middle East uncertainties came to the forefront just over a week ago, and that uncertainty flared up further this weekend with the U.S. joining the fray on Saturday night. Even so, stocks have remained resilient, with all of the indexes remaining in intermediate-term uptrends and not far from their recent highs, and there’s been very little abnormal action among individual stocks even after their big runs in May. That’s all to the good—but, at the same time, nothing has changed for the better, as very few stocks are reaching new high ground and there hasn’t been much net progress for the past month, even in many leaders. We’ll leave our Market Monitor at a level 7.
This week’s list has names from every nook and cranny in the market, which is a good sign. Our Top Pick is a real leader but has rested a bit during the past couple of weeks as the 25-day line has caught up. We’re OK entering here or (preferably) on dips.
This week’s list has names from every nook and cranny in the market, which is a good sign. Our Top Pick is a real leader but has rested a bit during the past couple of weeks as the 25-day line has caught up. We’re OK entering here or (preferably) on dips.
Updates
It’s one thing after another. But stocks keep inching higher.
January featured the interest rate scare, as the ten-year Treasury hit the highest level since 2023, and the DeepSeek news, which called AI spending into question and sent related stocks reeling. Yet the S&P 500 finished the month up 2.7% with 10 of the 11 sectors higher for January. This week features more potential market-moving issues.
January featured the interest rate scare, as the ten-year Treasury hit the highest level since 2023, and the DeepSeek news, which called AI spending into question and sent related stocks reeling. Yet the S&P 500 finished the month up 2.7% with 10 of the 11 sectors higher for January. This week features more potential market-moving issues.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Atlassian (TEAM), Fidelity National Services (FIS), Paramount Global (PARA) and Starbucks (SBUX).
WHAT TO DO NOW: It’s been a typically volatile January, with this week’s huge convulsions among AI stocks the latest crosscurrent to deal with. Overall, the top-down evidence is mostly neutral at this point, and leading stocks are in a similar boat as last week—improving, but without much decisive buying so far. To be fair, we’d like to put some money to work and could do so soon (next day or two) if we get the right setup, but tonight we’ll stand pat and look for signs big investors are getting involved. In the Model Portfolio, we cut our loss in Marvell (MRVL) on a special bulletin Monday, though most of our stocks are acting well and tonight we’re placing On Holding (ONON) back on Buy as it looks to be resuming its overall uptrend. Our cash position is right around 50%.
Small caps are up a very, very small amount over the last week. In fact, the S&P 600 SmallCap Index has hardly moved over the last five sessions.
I think that’s remarkable given everything that’s gone on lately.
The DeepSeek drama inspired a truly magnificent wipeout for the broad market on Monday. And we had an FOMC meeting yesterday that barely registered on the S&P 600.
I think that’s remarkable given everything that’s gone on lately.
The DeepSeek drama inspired a truly magnificent wipeout for the broad market on Monday. And we had an FOMC meeting yesterday that barely registered on the S&P 600.
There are a lot of things the stock market can handle.
In 2024 alone, stocks advanced more than 20% despite two major overseas wars raging, high interest rates, stubborn inflation, escalating unemployment, a toss-up presidential election in which one of the candidates changed midsummer, tepid consumer confidence, etc. That’s because, aside from Kamala Harris replacing Joe Biden as the Democratic candidate less than four months before the election, most of these potential headwinds were known. What Wall Street fears most is the unknown. And that’s why DeepSeek rattled markets on Monday.
In 2024 alone, stocks advanced more than 20% despite two major overseas wars raging, high interest rates, stubborn inflation, escalating unemployment, a toss-up presidential election in which one of the candidates changed midsummer, tepid consumer confidence, etc. That’s because, aside from Kamala Harris replacing Joe Biden as the Democratic candidate less than four months before the election, most of these potential headwinds were known. What Wall Street fears most is the unknown. And that’s why DeepSeek rattled markets on Monday.
The catalyst that has driven this market higher for more than two years got punched in the face on Monday. Is it the end of the gravy train or just an overreaction?
Stocks came crashing down on Monday. The S&P 500 was down almost 2% and lost most of this year’s gains in one day. The tech-laden Nasdaq index fell more than 3%. It was all because of some upstart Chinese company.
Stocks came crashing down on Monday. The S&P 500 was down almost 2% and lost most of this year’s gains in one day. The tech-laden Nasdaq index fell more than 3%. It was all because of some upstart Chinese company.
In today’s note, we discuss pertinent developments and ratings changes for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), American Airlines (AAL), GE Aerospace (GE), SLB Ltd. (SLB) and UiPath (PATH).
Projected strength in U.S. commercial loan growth and continued increases in M2 money supply bode well for the stock market’s liquidity backdrop.
Projected strength in U.S. commercial loan growth and continued increases in M2 money supply bode well for the stock market’s liquidity backdrop.
The market has been singing a more bullish tune lately and small caps are back in the headlines.
That’s because small caps enjoyed a nice rally after last week’s CPI and PPI data came out and the 10-year yield retreated.
Market observers have seen that the market rally has been broadening beyond just the Magnificent 7 and that small and mid-caps (SMID-caps) have been getting in on the action as well.
That’s because small caps enjoyed a nice rally after last week’s CPI and PPI data came out and the 10-year yield retreated.
Market observers have seen that the market rally has been broadening beyond just the Magnificent 7 and that small and mid-caps (SMID-caps) have been getting in on the action as well.
The Trump Administration is off and running along with Cabot Explorer stocks as markets closely watch the potential for tariffs on Canada, China, and Mexico.
Mexico and Canada are America’s two largest trade partners, and both countries are bracing for major economic disruption should Trump follow through. Mexico and Canada send about 80% of their exports to the U.S. Market turbulence in stocks based in Mexico or Canada could create an opportunity for us.
Mexico and Canada are America’s two largest trade partners, and both countries are bracing for major economic disruption should Trump follow through. Mexico and Canada send about 80% of their exports to the U.S. Market turbulence in stocks based in Mexico or Canada could create an opportunity for us.
What a difference a week makes!
Early last week, things were looking pretty gloomy for the market, with stocks on a six-week losing streak dating back to early December and interest rates, as measured by the 10-year Treasury yield, stretching to 14-month highs. More than 300 stocks on the New York Stock Exchange and Nasdaq were trading at 52-week lows.
Early last week, things were looking pretty gloomy for the market, with stocks on a six-week losing streak dating back to early December and interest rates, as measured by the 10-year Treasury yield, stretching to 14-month highs. More than 300 stocks on the New York Stock Exchange and Nasdaq were trading at 52-week lows.
While the market news is inundated with Trump stories as he has issued a massive number of executive orders on his first day in office, the real market catalyst right now actually started last week.
There were a slew of executive orders affecting the energy industry but no real surprises. The improving story remains essentially the same since the election. There was likely some relief that large tariffs have not been announced, at least so far. But the Trump news is overshadowing last week’s market-altering news.
There were a slew of executive orders affecting the energy industry but no real surprises. The improving story remains essentially the same since the election. There was likely some relief that large tariffs have not been announced, at least so far. But the Trump news is overshadowing last week’s market-altering news.
A week ago, the market was teetering on the brink. But it teetered in the right direction.
The benchmark ten-year Treasury rate had soared above 4.8%, dangerously close to the late 2023 peak of about 5%. December CPI inflation was reported last week. A bad number could have thrust the 10-year rate above the peak, almost certainly prompting a selloff in stocks. But Wall Street was happy with the number and things went the other way.
The benchmark ten-year Treasury rate had soared above 4.8%, dangerously close to the late 2023 peak of about 5%. December CPI inflation was reported last week. A bad number could have thrust the 10-year rate above the peak, almost certainly prompting a selloff in stocks. But Wall Street was happy with the number and things went the other way.
Alerts
The market and growth stocks are getting hit once again today (partially because of rumors of geopolitical tensions regarding China and Taiwan), but as always, we go with the evidence, and the selling wave in growth stocks that popped up a week or two ago has continued this week with more and more name flashing intermediate-term abnormal action.
WHAT TO DO NOW: Four days doesn’t guarantee success, but the sharp broad market rally during the past few sessions has turned our Cabot Tides positive and improved our Two-Second Indicator; growth stocks remain choppy, but some names are perking up there, too. All told, we’re going to put a little money to work today, adding half-sized stakes (5% of the portfolio) in Robinhood (HOOD) and ProShares Ultra Russell 2000 Fund (UWM). That will leave us with around 30% in cash. Details below.
Cava (CAVA) Moves to Sell a Quarter, SharkNinja (SN) to Hold
WHAT TO DO NOW: While a couple handfuls of mega-cap stocks act well, we continue to see more stocks hit air pockets than get going on the upside, which, combined with our mixed market timing indicators, has us staying relatively close to shore. Today we’re going to sell one-third of our stake in Cava (CAVA)—like so many names, the stock has been unable to break through resistance, and now it (and its peer group) has come under heavy selling pressure. Our cash position will now be just over 40%.
Portfolios
An updated portfolio for Cabot Options Institute – Earnings Trader.
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 – 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 – Fundamentals: All-Weather 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: All-Weather Portfolio
An updated portfolio for Cabot Options Institute – Quant 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.