Coming off a losing week two weeks ago, the indexes mostly regained that lost ground last week as the S&P 500 gained 1.9%, the Dow advanced 1.6% and the Nasdaq rallied 2%.

Coming off a losing week two weeks ago, the indexes mostly regained that lost ground last week as the S&P 500 gained 1.9%, the Dow advanced 1.6% and the Nasdaq rallied 2%.

The market has handled itself well during the past couple of weeks, consolidating normally, with our intermediate-term indicators still positive, which is all to the good. Still, leadership remains somewhat lacking and, while coming close, our Cabot Trend Lines are still negative, so we’re content to take things step by step while waiting for more institutional-quality names to get going. Tonight, we are extending our line a bit more, but will hold onto a 36% cash position and want to see added upside confirmation before we put too much more money to work.

The Senate Judiciary Committee recently approved the nomination of Terrance Cole to lead the Drug Enforcement Administration (DEA).

The full Senate may vote on Cole’s confirmation as soon as early June.

This could be the start of a significant turning point for cannabis stocks. That’s because Cole will address a Biden-era proposal to move cannabis to Schedule III from Schedule I under the Controlled Substances Act (CSA). The change would significantly enhance cannabis company cash flow by neutralizing an IRS rule that bars operating expense deductions against revenue from the sale of Schedule I substances.

Goodyear Tire & Rubber (GT) is no stranger to veteran subscribers of the Cabot Turnaround Letter. The stock was initially recommended in 2022 and was a long-time holding in the portfolio. I made the decision to sell the stock when I took over as chief analyst last summer, which at the time seemed like a good idea.

Indeed, the stock had been underperforming for quite some time, and management had just warned of “weaker underlying trends in the industry” for the second half of 2024, augmented by lower tire volume and higher costs. The stock dropped 16% to a new 52-week low at that time (early August) and was threatening to break a benchmark “support” level in its long-term chart, while the firm’s debt remained disturbingly high.

After a big rally, the market had earned the right to retrench a bit, and that came about last week after stocks were hit with a few “bad” news items, starting with the downgrade of U.S. debt, followed by a new high in longer-term (30-year) Treasury rates and capped by a threat of higher tariffs on Europe.

Those tariff worries eased over the weekend and in reaction the S&P 500 gained 2% on Tuesday.

It’s been a wild market so far this year. The S&P 500 has gone from the cusp of a bear market to within 5% of the all-time high in just seven weeks.

Uncertainty remains. A negative development could still roil the market on any day. Negotiations will likely take more twists and turns in the weeks and months ahead. But investors appear, at this point, to believe that the tariff situation won’t blow up. The fear of Armageddon is being removed.

But there’s still the economy. It could gain steam or slow toward recession. We are in a place, at least for a while, where anything can happen. It’s tough to pick a horse amid such varying possibilities. Fortunately, there is a trend to bank on that will thrive regardless of the near-term gyrations of the market or economy.

Artificial intelligence is a massive growth catalyst that will endure and thrive in any environment. Investors temporarily forgot all about it. It’s a generational phenomenon that hasn’t gone away. It just took a break. Now, those stocks are soaring back.

In this issue, I highlight a stock that is likely to benefit in the months and years ahead. It is still well off the high with good momentum and has a huge catalyst for growth in the months and years ahead.

After a big rally, the market had earned the right to retrench a bit, and that came about last week. Still, the action has been normal thus far, with most indexes and stocks losing ground but doing so relatively grudgingly while remaining north of key support. Of course, we’re still dealing with a thinner batch of leadership, as relatively few stocks are hitting virgin turf and there’s already a good number of smaller, more speculative names moving. Even so, we’re taking things on a step-by-step basis, and it’s been so far, so good for the rally—we’ll leave our Market Monitor at a level 7 and see how things go.

This week’s list has something for everyone, though again, most are either showing great strength (often after earnings) or pulling back normally after big recoveries. Our Top Pick has stormed back on record volume as earnings blew away estimates.

Stocks took a bit of a breather this week after weeks of positive gains fueled by tariff deals and pauses, sinking inflation and a very strong Q1 earnings season. Which way the market goes from here may depend on the headlines, but also on whether the bulls have the appetite for another big push to new highs. One area of the market we know is working? Precious metals. Gold has attracted most of the attention. But silver is starting to play catch-up. So today, we add a high-upside silver play via Cabot Explorer Chief Analyst Carl Delfeld.

Details inside.

As I do periodically over long holiday weekends, I stepped away from the “typical” Monday morning update and spent time with the family. Here is a shorter version of usual weekly update, focused entirely on our current open positions.

As I do periodically over long holiday weekends, I stepped away from the “typical” Monday morning update and spent time with the family. Here is a shorter version of usual weekly update, focused entirely on our current open positions.

The gold-silver ratio is an intimate relationship. It indicates how many ounces of silver are needed to buy one ounce of gold. In the last century, this ratio reached its lowest point at just under 15:1 at the end of 1979 and peaked at over 110:1 during the COVID crisis.

This year, we passed the 100:1 mark for only the fourth time in a hundred years – a strong signal that silver may be underpriced.

So today, we add an aggressive silver play to the Explorer portfolio as a bet that it will close the gap on gold.

The big macro news of the week wasn’t specific to small caps, but it sure helped in stopping a sliding small-cap index at its 25-day moving average line yesterday.

I’m referring to the CPI print for November, which was released at 8:30 AM ET yesterday and gave most of the major market indices a boost, with the exception of the Dow.

I recently noticed a few popular stocks such as MicroStrategy (MSTR) offering exposure to leveraged Bitcoin which to me seems like excessive risk and a sign of potential trouble.

This is like pouring gasoline on a roaring fire. It reminds me of a quote from Edward Chancellor’s book The Price of Time, which offered this gem:

“……as a rule, panics do not destroy capital; they merely reveal the extent to which it has previously been destroyed by [the taking on of excessive leverage in good times].”

The market is getting a little frothy.

The S&P 500 is up 5.5% in the five weeks since election day, though that’s a historically normal bump following an election. The bull/bear ratio topped 3.9 last week – just shy of the 4.0 “danger zone” that often precedes pullbacks, though it’s not the first time it’s been this high in recent months. And Bitcoin, an asset that thrives in bull markets and typically tops right before a major pullback, just crossed the $100,000 threshold for the first time and has more than doubled in the last three months.

May the buyouts begin. Poor sentiment has pushed the values of cannabis companies so low, the strong are now buying the weak. Like the recent cannabis company insider buying, this is a signal that valuations may be close to bottoming here.

However, realistically, it could be a while before the sector recovers since we are dependent on politicians for progress.

The post-election bounce is over. But stocks could still finish the year higher. These are good times. The S&P 500 is up about 30% year to date. This adds to a 26% return for the index in 2023.

In today’s note, we discuss a number of earnings results and new developments for several of our portfolio positions, including American Airlines (AAL), Atlassian (TEAM), Duluth Holdings (DLTH), Intel (INTC), SLB Ltd. (SLB) and Super Hi International Holding (HDL).

WHAT TO DO NOW: Remain bullish but continue to manage your portfolio and pick your spots carefully on the buy side. Our market timing indicators are in good shape, and leading growth stocks continue to impress, though near-term sentiment is getting euphoric. Tonight, we’re going to sell one-third of our stake in Shift4 (FOUR), which has fallen sharply on out-of-the-blue news, which will leave us with 16% in cash.

These are good times. The S&P 500 is up 6% since the election and 27% year to date. This adds to a 26% return for the index in 2023.

The market is seemingly making new highs every day as investors expect a higher level of economic growth going forward because of the election. We’ll see if the economic growth materializes. But this optimistic economy expectation comes while the Fed has begun a rate-cutting cycle that will likely last the next two years. Why wouldn’t the market be partying?

The market has been just great! The S&P 500 was up 5.7% in November and now has a 26.47% year-to-date return. This adds to the 26% market return last year.

Stocks were riding high, and the election provided a further boost as investors expect a higher level of economic growth going forward. The cyclical stocks have led the recent charge. The best-performing market sectors since the election are finance, consumer discretionary, and energy.

Small-cap stocks continue to act extremely well, and we have a new all-time high for the S&P 600 SmallCap Index. It hit 1,520 on an intra-day basis on Monday, then closed at 1,545. Both levels surpass the previous all-time high of 1,477 from November 2021.

The index is hanging tight to those levels today too, trading near 1,537.

Centrus Energy (LEU) shares jumped almost 19% this past week and are up 70% in the last six months. Dutch Bros (BROS) shares gained 6.3% this week following weekly gains of 10.6% and 36%.

Tariffs took center stage this week as the incoming Trump administration indicated day-one 25% tariffs on Canada and Mexico and some more for China as well.

After a brief dip following the post-election euphoria, the market is right back to a new high.

So far, the promise of stronger economic growth is more than offsetting the likelihood of higher interest rates for longer. As a result, new sectors have emerged as market leaders. Cyclical sectors have taken off. The financial, energy, and consumer discretionary sectors are leading the market. Those sectors are up 9.3%, 5.7%, and 8.6% respectively in the three weeks since the election.

When it comes to small appliances, SharkNinja (SN) is one of the more innovative players out there, and the company’s mass-market appeal and expansion into new categories continue to deliver impressive results.

Rivian (RIVN) has been our dog in the portfolio but I’ve held on because I think the potential for shares to come back and ultimately work well is still there. Yesterday’s first-quarter results don’t suggest that will happen right away, but there are certainly some bright spots.

Shares of Intapp (INTA) should open higher today after the company beat Q3 fiscal 2024 expectations after the close yesterday. Revenue grew 20.2% to $110.6 million, beating by $2.4 million (2.3%), while EPS of $0.14 was up from a penny in the year-ago quarter and beat by $0.07.

New kid on the block Zeta (ZETA) is starting the week off with a bang after the Q1 report yesterday sailed past expectations.

Shares of GoDaddy (GDDY) are trading about flat today as the stock digests yesterday’s slightly better-than-expected Q1 report. The story here remains intact as we look forward to the full launch of Airo, the company’s new AI-powered solution for website creation and management, a significant pain point/roadblock for creators.

Enovix (ENVX) Up On Q1 Results and Development Agreement, Weave Communications (WEAV) Dips After Q1 Report

Shares of Leonardo DRS (DRS) are trading down today despite Q1 results that came in ahead of expectations across the company as a whole, but with results in the legacy Advanced Sensing & Computing (ASC) segment just coming in as expected. It was the Integrated Mission Systems (IMS), which includes electric power and propulsion, doing the heavy lifting.

Shares of TransMedics (TMDX) are indicated to open nicely higher this morning (+10% to 15%) after the company smashed Q1 expectations.

Back on April 24 I suggested cannabis stocks looked like a buy in their weakened state. I singled out two ETFs for simplicity.

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.