A banner November for the stock market rolls on, and an encouraging start to the holiday shopping season could act as a catalyst for another strong month in December. The Stock of the Week portfolio is thriving with the pickup in the market, with nine of our stocks hitting either 52-week or all-time highs. So today, we take another big swing by adding a mid-cap software stock recently recommended by Tyler Laundon in his Cabot Early Opportunities advisory.

Details inside.

We have one open position with the intent of adding several more this week. I’ll be using our standard, highly liquid ETFs for one of the trades and a stock-based position as well. We haven’t dipped into equities much, but I expect to add a few of the most highly liquid stocks to our list of regulars.

I hope everyone had a well-rested couple of days from the market. Early last week we started the income wheel process over again in BITO and DKNG by selling a few puts. Both have offered wonderful sources of income since being introduced to the portfolio, so I plan to continue to try and eke out as much options premium (and capital gains) as I can from both sources as long as they will allow.

We are officially entering the earnings doldrums, but that certainly doesn’t mean that opportunities won’t present themselves. For instance, this week Marvell (MRVL) announces earnings and offers a decent opportunity for an iron condor and is potentially a candidate for a short strangle, a strategy we haven’t used in a while. I’ve gone over a detailed iron condor example in the “Weekly Trade Ideas” section. Details inside.

The S&P 500 and Explorer stocks are in an uptrend in November as investors bet that the Federal Reserve’s interest rate hikes are done for now and that inflation will moderate without a recession. In addition, with most S&P 500 companies having reported third-quarter results, more than 80% have beaten analyst expectations.

With the investing climate improving, today we add two new positions to the portfolio. Enjoy, and Happy Thanksgiving!

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

There has been a dramatic turnaround in the market this month. After falling for three straight months, the S&P 500 has rallied 7.6% in the first three weeks of November. The main reason for the turnaround is interest rates.

If the current Wall Street expectation that the benchmark 10-year Treasury rate peaked at 5% is true, it should be positive for stocks, or at least eliminate a big negative.

The current consensus is very positive. Inflation appears subdued, the Fed is done hiking rates, and the economy is nowhere near a recession. It appears that we are having a “soft landing,” where the market gets through this rate-hiking cycle without the usual economic pain. Of course, things can change. The positive situation could discombobulate next year.

We’ll see what happens in the new year. But the prognosis for stocks looks good for at least the rest of the year. It’s a good time to take advantage of stocks that have risen to new 52-week highs and command high-priced calls. In this issue, I highlight sizable covered call premiums for recently surging Intel (INTC) and the first call for Digital Realty Trust (DLR).

The intermediate-term trend has turned up for all of the major indexes, the number of stocks hitting new lows is drying up nicely, individual leading stocks are acting well and, while it’s not a torrent, we are seeing some more breakouts and setups as the days go by. It’s not 1999 out there, with wide swaths of the market still repairing the damage from recent months, so we continue to favor a step-by-step approach when it comes to extending your line. We’ll move our Market Monitor up to a level 6 and will continue to raise it should the rally continue to gain steam.

This week’s list has another crop of super-strong charts, and from a variety of industries, too. Our Top Pick isn’t a lightning-fast mover, but it looks like the leader in a group that’s shown exceptional strength off the lows and has a history of trending nicely when conditions are favorable.

The November market rally continues, as signs of renewed health among stocks are popping up in more and more places – including in the Stock of the Week portfolio. So today, we’re only adding – and upgrading. The new addition is a longtime recommendation by Cabot Dividend Investor Chief Analyst, Tom Hutchinson, and one that’s having a surprisingly good year. Lately, it’s gone into overdrive and yet still trades well below its highs. We try and capture the stock’s newfound momentum as we head into the holiday season.

Enjoy – and Happy Thanksgiving!

As we enter the holiday-shortened week, we have one open position. My intent is to add another trade this week, so we have at least two positions headed into the December expiration cycle. Other than that there isn’t much to discuss at the moment.

Earnings season is mostly behind us as we enter the week of Thanksgiving and a holiday-shortened week of trading. There are still a few opportunities lingering ahead, but the potential trades are few and far between until another round of fresh earnings announcements starts anew around the middle of January.

As we enter the holiday-shortened week, we have five open positions. My intent is to sell puts in BITO and DKNG this week, so we have at least seven positions headed into the December/January expiration cycles. Both stocks allowed us to prosper, earning more than 13% in total at expiration last Friday with DKNG being the big winner, as we locked in 9.6%.

This note includes the Catalyst Report, a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday, and earnings from Duluth Holdings (DLTH).

The recent market rally has leveled off and is wavering. The next few days may determine whether the market rally continues, or the indexes retreat once again.

The latest upturn has been stoked by optimism over retreating inflation and a softer, gentler Fed. The Central Bank is widely expected to raise the Fed Funds rate at a slower 0.50% pace, versus the last four hikes of 0.75%, at the December meeting in two weeks. But Chairman Powell is giving a speech today. Any indication of a higher-than-expected hike will undo the major reason for the recent rally.

Another event with consequences is the earnings report for recommended name Big Lots (BIG), scheduled for pre-market release on December 1.

The rally sputtered. But it hasn’t reversed. That’s because there are reasons for both optimism and caution.

There is a growing perception that the problems responsible for this bear market have peaked. Inflation has been receding and the Fed might be less aggressive going forward. The market tends to anticipate six to nine months into the future, and it sees lower inflation and the Fed done hiking rates.

The market performed well during the holiday-shortened week.

The S&P 500 is brushing up against its 200-day moving average, and if I had to guess, I would expect it to reverse from here.

While I’m not a technical analyst I wouldn’t be surprised if we saw some weakness, similar to what happened in August after the index brushed the 200-day moving average.

Yesterday I suggested adding $40,000 of our cash to AdvisorShares Pure US Cannabis (MSOS) with a buy limit of 11.45.

I’m an optimist. That quality has served investors well for decades. There are many stocks at cheap prices that will likely be a lot higher in a year or two as a new bull market will emerge. But I don’t believe that the market is on its way to the Promise Land just yet.

The market boomed today after a tamer-than-expected inflation report, with the Dow exploding higher by nearly 1,200 points (3.7%) and the Nasdaq surging 761 points (7.3%).

A quick reminder that Cabot will be closed tomorrow and Friday for Thanksgiving. I hope you have a great holiday and enjoy a break from the market.

As far as our portfolio goes there is very little that’s changed since last week.

Last week, we rolled our valuation and earnings estimate table forward by a year, dropping the 2022 estimates and adding the 2024 estimates.

There are a couple of things that I’m thinking about this week.

First, the yield curve is inverted. An inversion of the 10-year – three-month yield curve has predicted all of the last recessions, and so I have high confidence that we will see a recession in 2023.

With that being said, usually, the market performs better in the year of the recession than in the year before the recession (markets are forward-looking!).

As such, I’m relatively optimistic.

Today I am adding $40,000 of our cash to AdvisorShares Pure US Cannabis (MSOS) with a buy limit of 11.45.

Five of our Profit Booster positions expired on Friday. Two expired for full profits, while in the case of three covered calls, the stock closed below our short strike price.

Today is the expiration of our August covered calls. While last month was nearly perfect in terms of our trades, this month was a bit choppier. Let’s dive in …

Thanks to the huge 17-month downtrend that ended in late June, cannabis stocks are all very good values today. The best ones to buy are the ones that have been trending up since early July. Those are rated buy below.

Today is a sad day, in a way.

Why?

Because I’m parting ways with Dorchester Minerals (DMLP).

As I discussed in our issue last week, with 30 days left in the September 16, 2022, expiration cycle, it just doesn’t make sense to hold on to our JPM puts any longer.

Our BITO 16 calls for the August 19, 2022, expiration cycle are essentially worthless. Same goes for our GDX 28 calls.

Sell ARIS and Half of SPT

I will be exiting the Home Depot (HD) trade today. I will discuss the trade in greater detail in our upcoming subscriber-exclusive webinar, at noon ET this Friday.

Like WMT, as discussed in our weekly issue last week, and on our weekly call, I will be taking a position in Home Depot (HD) today. HD is due to announce earnings before the opening bell Tuesday (August 16). The stock is currently trading for 313.02.

As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in Walmart (WMT) today. WMT is due to announce earnings before the opening bell Tuesday (August 16). The stock is currently trading for 133.27.

Okay, it’s finally time to dip our toes into a few new positions for our active portfolios. I want to start by initiating one trade in each of our active portfolios today and plan to ramp both Patient Investor and Growth/Value portfolios up over the next few expiration cycles.

CS Disco (LAW) is getting hammered today after the company lowered full-year guidance. The main issue is that the company’s Review solution isn’t selling as well as expected. The idea here is that revenue per customer jumps when they add more modules to the eDiscovery solution. This is a standard software business model.

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.