Before we dive into this morning’s Weekly Review, I wanted to bring to your attention to the schedule for this holiday week. I will be working/trading as normal Monday through Wednesday, and then will be off Thursday through Monday morning, which means we won’t be sending a Daily Watchlist or the Week in Review on Monday, November 27. Have a great Thanksgiving!

Before we dive into this morning’s Weekly Review, I wanted to bring to your attention to the schedule for this holiday week. I will be working/trading as normal Monday through Wednesday, and then will be off Thursday through Monday morning, which means we won’t be sending a Daily Watchlist or the Week in Review on Monday, November 27. Have a great Thanksgiving!

The market continues to improve, with our Cabot Tides turning positive earlier this week. Now, not everything is rowing in the same direction, and among growth stocks, the pickings are relatively concentrated, so for now we’re stepping slowly into stocks and building positions rather than cannonballing into the pool—we added a chunk of money earlier this week, and tonight we’re adding one new half-sized stake in a volatile name we’ve been following for a while but has now changed character on the upside.

Elsewhere in tonight’s issue we review all our stocks, dive into many encouraging pieces of secondary evidence and one group that has a history of trending and is showing outsized institutional accumulation right now.

In the November Issue of Cabot Early Opportunities we lean into the strengthening market with a group of companies doing everything from providing security for new AI applications to paving roads in the Sun Belt to making packaged foods for health-conscious consumers, and more.

As always, there’s something for everybody!

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.

Last week was a split tape, with the big-cap indexes continuing their thrust higher, though the broad market remains a soft spot. Overall, the intermediate-term trend is effectively neutral, and we think what happens from here will tell the tale, with further strength indicating that a year-end rally is underway, though should the broad market infect the leadership, all bets are off. Right now, we’re more optimistic than not, but are simply looking for more confirmation on the upside—we’ll leave our Market Monitor at a level 5.

We think the most bullish thing the market has going for it is the action of individual stocks, a good number of which are beginning to percolate. Our Top Pick definitely quacks like a liquid leading name.

The market keeps improving but is not necessarily back to 2021 or even June and July 2023 levels just yet, as many individual stocks are stuck in neutral. Fortunately, that’s not the case in the Stock of the Week portfolio, as eight of our holdings are hitting either 52-week or all-time highs! Today, we try and strike while the iron is hot – or at least warming – by adding a familiar growth stock that was a market darling during Covid, had a very rough 2022, but has now gotten the attention of Mike Cintolo in Cabot Top Ten Trader after a major gap up at the end of October.

Details inside.

We currently have two positions due to expire in December. My hope is to add at least one more December expiring position this week as our deltas are leaning far too negative for my liking, at least at the moment.

There isn’t much to discuss at the moment so I’m going to keep it short this week. We have several positions to due to expire each of the next three weeks. If all goes as planned, we should have the ability to lock in some really nice premium which should push our returns to new highs.

I expect to see a busy week this week with several key positions on our watch list due to announce earnings.

I expect to start the week with a trade in Home Depot (HD) which is due to announce prior to the opening bell tomorrow. The other announcement I’ll be focusing on is Walmart (WMT) which is due to announce prior to the opening bell on Thursday. I fully anticipate making trades around both announcements, as long as Mr. Market cooperates, so stay tuned for several trade alerts this week.

The latest market surge has left the All-Weather portfolio up a respectable 6.5%, with our poor man’s covered call in the Vanguard Total Stock Market ETF (VTI) continuing to do the heavy lifting, up 25.2%. The S&P 500 is up 5% over the same time frame.

Our SPDR Gold Shares ETF (GLD) position has been resurgent of late. After being down roughly 20%, our poor man’s covered call position in GLD now sits 8% higher.

How quickly the market can change directions as one week we are on the verge of a steep decline, and the next week the indexes explode higher. This last week fell into the big winner camp as the S&P 500 gained 5.35%, the Dow rallied 5.07% and the Nasdaq added 6.61%.

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Macy’s (M) – With a capable new CEO since February 2018, Macy’s is aggressively overhauling its store base, cost structure and e-commerce strategy to adapt to the secular shift away from mall-based stores. Macy’s acceleration of its overhaul shows considerable promise.

As far as today goes, the S&P 600 Small Cap Index has come up against a wall at 1,230, which is where support was in January and February.

Centrus Energy (LEU) shares recovered five points this week to reach 35 as the Department of Energy announced that it and Centrus Energy’s American Centrifuge Operating, LLC will share the $150 million cost 50-50 to demonstrate production of a fuel called high assay low enriched uranium. This is still a buy for aggressive investors.

Over the past couple of weeks, there have been a couple big news items:

• The collapse of crypto exchange, FTX.
• The market rallying on lower-than-expected inflation.

The collapse of FTX has nothing to do with micro-caps, but it’s a fascinating story. I can’t wait to read the Michael Lewis book on it (apparently, he’s been working on the book for the last 6 months).

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What a difference a few weeks can make. The S&P 500 has moved up 15% from the low of October. Have we turned the corner on this bear market?

The main catalyst is a slower-than-expected inflation report. While still unacceptably high, inflation showed real signs of slowing in October. That means the Fed could be done hiking rates sooner. The chief cause of this bear market, rising inflation and a hawkish Fed, show signs of abatement.

It’s a furious rally. The market is on fire. Last week’s inflation report ignited a surge that might last longer. Let the good times roll (for now).


October inflation numbers were reported last week and both top-line CPI and core inflation numbers were lower than expected. It reignited hope among investors that inflation has peaked and is on the decline and the Fed will stop raising rates sooner than previously expected.

Following our demoralized and never-changing, four-word question of “are we there yet” came worthless responses like “soon enough,” or “sometime later,” “we’re getting closer.”

With the overall market in an extreme, short-term overbought state after rallying almost 12% in just 27 days, I’ve decided to place a bear call spread in DIA. We already have a bear call in SPY and I want to add another in DIA today for the September expiration cycle. I also want to place an iron condor today and my hope is to add a bull put spread or two over the next few days to fully balance out our deltas.

We need to roll our August positions as there is little to no value left (good thing) and sell more premium. So far, our most conservative portfolio is up over 10% since we started to initiate positions back in early June. Even with the wild whipsaws since that time, the portfolio has managed to endure with flying colors, maintaining a nice, smooth equity curve.

Our passive portfolios continue to shine! Our Yale Endowment Portfolio is up over 20% and our most conservative portfolio, the All-Weather Portfolio is up close to 10%. Not bad for just over two months. I’ve found over the years that the most conservative approach is often the best. Less volatility, smooth equity curve, rarely any sleepless nights and over the long term, the results are historically better than more aggressive approaches.

Well, I think it’s about time to rip the Band-Aid off and close our August 19, 2022 SPY iron condor. As we talked about last week, the move in SPY has been a historic one since we added our position back on July 14. At the time SPY was trading for 375.87. Now, only 27 days later, the world’s largest stock index trades 11.7% higher at 420. Not too shabby for the bulls.

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

Our WFC 39 puts for the August 19, 2022, expiration cycle are essentially worthless. Same goes for our KO 57.5 puts. As a result, I want to buy back both our WFC and KO puts, lock in a decent profit and immediately sell more premium in both.

The good news today is that the bottom seems to have passed, for both the broad market and stocks in the cannabis sector. The S&P 500 was down 25% at the bottom, while the cannabis index was down 84% at the bottom—and for both, that seems enough.

Today’s CPI reading showed inflation moderating a little (not a huge surprise) and the market has, so far, loved the result. The Nasdaq has been up over 2% in the early going.

As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in Disney (DIS) today. DIS is due to announce earnings after the closing bell today (August 10). The stock is currently trading for 110.60.

DigitalOcean (DOCN) delivered Q2 results yesterday that slightly missed on revenue but beat by a good margin on EPS. Revenue was up 29% to $133.9 million (missed by $600K) while EPS of $0.20 beat by $0.10. Full-year revenue outlook was left unchanged, but profit outlook was raised as management has, and will continue to, rein in spending.

Waking up today to more rumors that Avalara (AVLR) is going to be sold to Vista Equity Partners wasn’t too surprising. Speculation had been swirling for weeks. But when the implied takeover price of 93.5 was announced anybody that follows this company did a double take. Was there an error in the press release? AVLR closed at 95.6 last Friday.

We will finally be initiating a position in our active portfolios (Buffett, O’Shaughnessy) this week. 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.