Nothing has officially changed with our market timing indicators, so we remain in a very cautious stance, but the wear-you-out bear phase of the past couple of years (and the sharp declines of the past three months) has had many secondary indicators (breadth, sentiment, etc.) in high-reward positions, and this week’s strength is certainly intriguing. We’re not jumping the gun in any major way, but we are adding one half-sized position in a strong actor and have our antennae up to see if this rally can finally be the real deal.

In tonight’s issue, we review our remaining positions (most of which have popped nicely), our overall market thoughts (including some rays of light from our Two-Second Indicator) and go over many high-potential stocks should the bulls continue to press forward.

This month we’re adding a small company that specializes in the opaque and inefficient market for selling surplus and salvaged goods.

The company has a market cap of just $580 million and is growing revenue and EPS by double digits. It’s an interesting setup, especially as government agencies and corporations increasingly look to save money and achieve sustainability goals.

All the details are inside this month’s Issue.

The Federal Reserve yesterday maintained its benchmark interest rate while leaving the door open for further action as officials work to bring inflation back to the central bank’s 2% target. This makes sense, though markets are still a bit on edge as further increases are a possibility.

But today, we take a big swing with an aggressive stock that combines biotech with artificial intelligence - and is trading well off its highs.

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’s not much new to say when it comes to the market—just about all of the primary evidence remains bearish, and interest rates are still in a firm uptrend, too. There are a growing number of secondary measures that are flashing green, effectively saying a solid bounce (and maybe more) should be coming soon. Thus, we’re staying alert and keeping a list of resilient stocks and sectors, but at the risk of repeating ourselves, we have to see the buyers show up for more than a few hours to start thinking investor perception is truly changing for the better. We’re leaving our Market Monitor at a level 4.

This week’s list has more than a few familiar names, including some initial earnings winners. Our Top Pick is a steady performer that also is showing great growth thanks to both of its top-selling brands—and the stock just emerged from nearly three months of chopping lower on its report. Try to buy on dips.

The indexes are hovering perilously above their May lows, with the S&P 500 and the Nasdaq entering correction territory (-10%) last week. And this week, we’ll hear from the Fed again (gulp), the October jobs report comes in, and we’re still in the heart of earnings season, with Apple (AAPL) being the headliner. Spooky season indeed!

To prepare for all scenarios, this week we’re selling out of a couple laggards and adding a well-known retailer that’s actually in an uptrend. Mike Cintolo recommended this retailer in Cabot Top Ten Trader last week, in fact.

Details inside.

There was little to no value left in the SPY 452/457 bear call spread, so we thought it was best to take our profits off the table and establish another bear call spread to protect our 408/403 bull put spread. One thing is certain: We will have to be nimble as we approach the November 17, 2023, expiration cycle. With only 18 days left until expiration, time decay is working in our favor. A short-term move to the upside, off oversold levels, should allow us to take our bull put spread off for a small profit. A rally should also “hopefully” lower implied volatility in SPY which should help our newly added bear call spread as well. As always, price action will be the final determinate.

We decided to place our third trade of the season in Mastercard (MA) by using a 47.5-point range, with our short strikes at 360 (puts) and 407.5 (calls). We felt comfortable with the range as it was not only well outside of the expected range (370 – 400) for MA, but covered, on a percentage basis, almost every earnings move going back to November 2011. These are the type of setups we prefer to trade.

As discussed over the past few weeks, we finally added the SPDR Utilities ETF (XLU) to the portfolio, which now gives us seven total income-producing positions. My goal is to have 8 to 10 positions, so we’re almost there. I plan to add another position this week, but I’ll be taking the opposite approach. I plan to add a stock or ETF with a little higher IV to give us the opportunity for greater options premium. As I’ve stated in the past, I like to diversify by not only using uncorrelated assets, but to use assets with varying levels of implied volatility.

There is no sugar coating it, the market had a very bad week as the S&P 500 fell 2.5%, the Dow lost 2.14% and the Nasdaq declined by 2.6%.

There is no sugar coating it, the market had a very bad week as the S&P 500 fell 2.5%, the Dow lost 2.14% and the Nasdaq declined by 2.6%.

Cannabis stocks are trading like a group in need of a catalyst.

* The AdvisorShares Pure U.S. Cannabis (MSOS) exchange traded fund (ETF) has fallen 28% from the peak of the rally caused by last summer’s news of federal government progress on rescheduling.

* The AdvisorShares MSOS 2x Daily (MSOX) ETF is down 38%.

Will the group see a catalyst soon? I put odds at much higher than 50%. This makes cannabis stocks a buy in the current retreat, both for a trade but also as a medium-term, multiyear position.

WHAT TO DO NOW: Remain defensive, but be ready to take some action. From a top-down perspective, the market is improving, with our Cabot Tides on the verge of a green light. However, individual stocks remain a mine field, with many acting better but plenty of blowups, including many high-profile names, like Meta (META) today and our own Wolfspeed (WOLF), which collapsed today after earnings; we sold our shares earlier today via a special bulletin.

A couple of weeks ago the S&P 600 SmallCap Index was trading at a greater than 25% discount to the S&P 500 on a forward PE basis.

The market has been a lot better over the past week. The reason is earnings.


So far, earnings have been better than expected this quarter, although it’s still early. The hope is that a soft landing is still possible, at least as far as corporate profits are concerned. The early better-than-feared results are prompting hope that corporate profits can weather this recession with less damage than has already been priced into stocks.

I’d like to thank each of you for your interest in renewable energy, decarbonization and ESG investing. I remain a steadfast believer in the long-term transition to clean energy and the profits that it will offer to investors. Since I began investing in the sector in 2007, I’ve never been more optimistic about its future, regardless of the markets right now.

With the arrival of earnings season and perhaps some indications that the 10-year US Treasury yield will peak at around 5%, the broad stock market appears to have found at least momentary stability. Whether this is just another “eye of the storm,” or a true end to the bear market, is unknown and unknowable.

This week was another relatively slow one. However, we did have two companies report earnings.

Due to changing business conditions, Cabot has decided to end the SX Crypto Advisor publication. I want to personally thank everyone who subscribed and tuned in to our webinars. It has been a pleasure to provide you with this research content, I hope you enjoyed reading despite the tough year in the markets.

You will receive further information from the company regarding this closure process.

Cabot Options Institute Earnings Trader shows you how to use options to profit during the most profitable period in the market: earnings season. Most people are unaware, but you can reliably collect a month’s worth of gains in a matter of days… and sometimes hours.

This week, Dow (DOW) and Nokia (NOK) reported earnings. The deluge for our companies starts next week with twelve companies reporting.

Next week, we will publish the November edition of the Cabot Turnaround Letter on Wednesday and our proprietary Catalyst Report on Friday.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

Small caps are still trading at a very steep discount that implies very attractive returns in the coming year. The Wall Street Journal had a so-so piece on this earlier in the week.

Geothermal energy producer Ormat Technologies (ORA) closed Friday at 86.54, above our target for a breakout. We are shifting the stock from ‘Watch’ to ‘Buy’ for Monday.

Let’s Ring The Register With GO. MTDR Moves To HOLD

We currently own the DBC January 19, 2024, 22 call LEAPS contract at $10.50. You must own LEAPS in order to use this strategy. If you wish to enter the position and are uncertain about which LEAPS to purchase, please refer to the reports section of your subscriber page, or our latest subscriber-exclusive webinar in which I go through the process, step by step, of entering a new position on an already established position.

I’ve decided to go ahead and buy back our short calls in GLD, DBC, VNQ and VTI for the opportunity to sell more premium in September. I will be sending the trades in two separate alerts to make it a little more manageable. I’ll start with GLD and VTI in this alert…

With 22 days left in the August 19, 2022 expiration cycle we are able to lock in well over 50% of the original premium sold in GLD back on July 8.

MSFT opened the day within our range of 227.5 to 270. However, MSFT has pushed higher throughout most of the day and has hit our stop-loss. As a result, I am going to exit the trade for a small loss. I don’t want to take a what is now a small loss and turn it into something larger. I will discuss the trade further in our upcoming subscriber-exclusive webinar, at noon ET this Friday.

As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in Microsoft (MSFT) today.

Microsoft is due to announce after the closing bell today.



Iron Condor Earnings Trade in Microsoft (MSFT)

In today’s trade alert I want to sell cash-secured puts in JPMorgan (JPM).

I want to close out our IWM iron condor today for $0.34.

AXP looks to open the day within our range of 134 to 157.5 and, per the mechanics of the strategy, I want to take the trade off the table. I will discuss the trade further in today’s subscriber-exclusive webinar, at noon ET.

Our WFC puts for the July 29, 2022, expiration cycle are essentially worthless. As a result, I want to buy back our WFC July 29, 2022, 35 puts for $0.02, lock in a decent profit and immediately sell more premium. I’m only going out 29 days to the August 19, 2022, expiration cycle. I’ll sell even more put premium in September if all goes well.

As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in American Express (AXP) today.

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.