Despite the index returns this year, many stocks are still in a bear market.

Some interest rate-sensitive stocks recently fell to the lowest level since the trough of the pandemic market more than three years ago. But interest rates have likely peaked. And the main reason for the decline is over.

Buying stocks in the throes of a bear market has proven to be a winning strategy over time. Buying stocks after they have already started to climb out of the lows has proven to be a winning strategy sooner.

The timing may be perfect for a rare opportunity to generate much higher returns than can normally be expected from stocks of defensive companies. In this issue, I highlight a defensive stock that had been a stellar performer before inflation and rising interest rates took hold. It is priced near the lowest valuations in its history and has recently been generating upward momentum.

Despite some early-in-the-week wobbles, the bulls were able to rally into the close of the week and again tack on gains. For the week the S&P 500 gained 0.8%, the Dow was unchanged, and the Nasdaq rose by 0.7%.

We continue to see some near-term tremors, but beyond that, the evidence looks pretty great, both from a top-down perspective and, even more so, among leading stocks, which continue to behave themselves, with a lot of controlled pullbacks and tight action among those that have dipped—while many others are still pushing higher. All in all, we’re encouraged, though for the moment we do think it’s best to pick your spots. Our Market Monitor stands at a level 7.

This week’s list has another balanced collection of ideas, with many different sectors and types of stocks. Our Top Pick is one of many turnaround-type retailers that’s cheap, has new-ish management and should have solid growth ahead—and the stock is perking up, too.

We enter the last few weeks of the year with plenty of momentum, and this week’s macro data-heavy slate (CPI and PPI reports, the latest Fed announcement) can only do so much damage to our portfolio on the heels of a very strong couple months. Nearly half our holdings – 10! – are trading at 52-week or all-time highs as of this writing. So today, we take another big swing on a mid-cap biotech newly recommended by Carl Delfeld in his Cabot Explorer advisory.

Given our recent string of losses I thought it would be appropriate to discuss sequencing risk and how important it is to understand how it impacts a high-probability strategy. Sequencing risk is a major component in the world of statistically based, high-probability options strategies – which is why I always emphasize why position size is so important.

The Income Trader service is oftentimes viewed as the tortoise approach. Among many investors today, the slow and steady “tortoise” approach just isn’t sexy. But really, who cares? I certainly don’t, I’m just a nerdy options trader who prefers to sell options with every opportunity, so “sexy” isn’t really in my vocabulary. I care about returns…and more specifically, long-term returns. Returns that offer not only steady growth but sound risk mitigation. And that’s what Income Trader and our income wheel approach offer during both bullish and bearish markets.

We have officially entered the earnings doldrums, but that certainly doesn’t mean that opportunities won’t present themselves. For instance, this week Costco (COST) and Oracle (ORCL) announce earnings and offer a decent opportunity for an iron condor. I’ve gone over a detailed iron condor example in the “Weekly Trade Ideas” section in this issue. Enjoy!

We have some exciting times ahead! All of our Dogs and Small Dogs positions will be closed out prior to the December 29, 2023, expiration cycle and we will once again start anew by adding all the qualifying Dogs for 2024 during the first week of the new year. Stay tuned as I will have more information as we near the end of the December 29 expiration cycle.

Shortly after we add our Dogs and Small Dogs during the first week of 2024, we will begin the process of phasing out of our 2025 LEAPS and into 2026 LEAPS in the passive portfolios (All-Weather and Yale Endowment).

Despite some early-in-the-week wobbles, the bulls were able to rally into the close of the week and again tack on gains. For the week the S&P 500 gained 0.8%, the Dow was unchanged, and the Nasdaq rose by 0.7%.

Despite some early-in-the-week wobbles, the bulls were able to rally into the close of the week and again tack on gains. For the week the S&P 500 gained 0.8%, the Dow was unchanged, and the Nasdaq rose by 0.7%.

This month we’re adding a small company that specializes in software that helps organizations train their employees and the partners they work with.

The company has a market cap of $1.5 billion, is growing revenue by about 25% and throws off a ton of cash relative to its size. Moreover, I rarely see this stock in the media, despite impressive growth and achievements. I think that’s about to change.

All the details are inside this month’s Issue.

Led by the Magnificent Seven, the S&P 500 is a bit overcooked at the moment. Small and mid-caps, on the other hand, are cheap - and appear poised for outperformance in the New Year. So today, we add a mid-cap life sciences company with high upside potential in an emerging area of biology.

I hope you’re having a wonderful holiday week. I celebrated Christmas with my wife and kids (Gracie-7 and Tripp-4), as well as my parents and in-laws. I’m lucky because we all live in the Boston area – so travel was minimal. We enjoyed tons of good food and wine.

This week there were no earnings reports, so most of the note and podcast cover relevant news on our recommended companies.

After a decent bounce yesterday, the market is coming undone today after a couple of poor earnings reports and a continuation of the general malaise out there.

Portfolio Changes: Infineon Technologies (IFNNY): FROM BUY A HALF TO HOLD


Centrus Energy (LEU) shares were up a point this week but the Zacks Consensus Estimate for its current-year earnings has been revised 21% downward over the last 60 days. This is still a buy for aggressive investors as interest in expanding nuclear power gains momentum.

Small-cap stocks continue to trade in the same 5% range that they’ve been in for the last month. On the S&P 600 Small Cap Index that translates to a range of 1,184 – 1,252. At the low end of that range we have the upward sloping 50-day line.

This year stunk. Next year should be better. Remember that if the market falls to a new low early next year.

There are some very good reasons to believe the market will turn around in 2023. Stocks trend higher over time. The average bear market lasts around 15 months. This one is almost a year old. Of the seven negative-returning calendar years for the market since 1980, five were followed by years of returns of over 20%.

Well, December has been a drag.

No Santa Claus rally.

And my New England Patriots look awful.

With the Patriots’ comically bad loss to the Raiders on Sunday night, they aren’t mathematically eliminated from the playoffs. But they effectively are.

It’s really the holiday season now. This time of year, investors stop paying attention to the market, like during the last days of the summer. That means, in the absence of game-changing headlines, stocks probably won’t do much of anything until the rubber hits the road after New Year’s.


When sobered up investors take a fresh look at stocks in January what will they see? They’ll see what they saw before they stopped paying attention, a lot of uncertainty.

The financial media, observers and traders are focused almost exclusively on the path of the Fed’s interest rate tightening policy. How much will they raise rates at the next meeting? How about the meeting after that? Then what? What is the terminal rate (the highest rate of the cycle)? When will the Fed start reducing rates?

This week there were no earnings reports or ratings changes, so most of the note and podcast cover relevant news on our recommended companies.

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

Small-cap stocks continue to trade in the same 5% range that they’ve been in for the last month. On the S&P 600 Small Cap Index that translates to a range of 1,184 – 1,252. At the low end of that range we have the upward sloping 50-day line.

We currently own the EEM January 19, 2024, 30 call LEAPS contract at $11.50. You must own LEAPS in order to use this strategy.

We placed our SPY trade on September 9th for $0.75, now it stands at $0.25 with 36 days left until expiration.

Shares of steel producers plunged on Wednesday after Nucor (NUE) said it expects third-quarter earnings to come in under Wall Street’s estimates.

We’re going to step away from Ingles Market (IMKTA) today and book a modest, single-digit loss on the name. I’ve had IMKTA on a short leash following the stock’s reversal soon after it hit an all-time high on August 23.

Greetings. I’d like to intro myself as the new editor of Cabot Sector Xpress Cannabis Advisor.

With the Russell 2000 ETF (IWM) trading for 183.51, I want to place a short-term iron condor going out 38 days. My intent is to take off the trade well before the October 21, 2022, expiration date.

We just placed our QQQ bull put spread two days ago, but with 42 days left until expiration and the ability to lock in over 50% of the original premium sold I intend on taking off the trade and establishing a few new trades over the coming days, possibly even later today.

With the market rallying this week and back into a short-term overbought state, I want to add a bear call spread to the mix. I’ll be adding an iron condor and potentially another bull put spread to the mix early next week.

Desalination equipment maker Energy Recovery (ERII) settled at 25.55 Thursday, a breakout over 25, which is the move we’ve been watching for.

With only 16 days left and quite a few important data points being released over the next week or so, I’ve decided to take off our iron condor in IWM for a small profit. I will be reestablishing a new iron condor most likely tomorrow or Monday for the October expiration cycle. If you choose to hold on, please be aware of the risks.

I plan on rolling several more of our short call positions, EFA and EEM to name a few, over the next two days. But today, I want to go ahead and roll our CVX and DBC calls. I also plan on adding several new positions to our Growth/Value Portfolio and Buffett Portfolio. Stay tuned!

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.