The Fed’s latest hawkish stance prompted an upside breakout in Treasury rates and a big late-week selloff in the stock market, with just about everything getting whacked. That action puts to bed the rally attempt from late August, of course, and reinforces our overall stance—the intermediate-term trend remains down, and with the broadening of selling pressure, we’re pulling our Market Monitor down to a level 5. To be fair, though, we’re not sticking our head in the sand: Yes, there are many worries, but the longer-term trend is still up and there’s plenty of evidence suggesting a resumption of the post-bear rally is coming at some point. Even so, it’s best to wait to see the bulls arrive first than to catch falling knives—right now, we advise holding plenty of cash.

While there aren’t many super-strong stocks out there, this week’s list has many that have taken the selling in stride thus far. Our Top Pick is helping to lead a group move that got underway a few weeks ago and could be starting its first pullback—further weakness would be tempting.

So much for the market being boring! The Fed – with its “higher for longer” vow – broke up the recent monotony, albeit not in a good way. The S&P 500 has dipped to its lowest level since June, and growth stocks have had a rough go these last two months. But all signs point to a fourth-quarter bounce-back – new bull markets almost never up and fizzle within a matter of months. Knowing this, today we add a beaten-down biotech stock with plenty of upside, a recent recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

Volatility has, once again, made an appearance. However, as we have all seen over the past few months, sightings have been rare and, more annoyingly, fleeting. If volatility and in turn IV ranks are able to stay at current levels or potentially rise a little, we should begin to see opportunities pick up. I’ll continue to remain cautiously optimistic and patient until then.

All is well as we head towards the October 20, 2023, expiration cycle. Our BITO position is due to expire at the end of the week, and if all goes well, I intend to buy back our BITO calls, lock in profits and immediately sell more call premium. Otherwise, there isn’t much to do other than allow time decay to work its magic as we head closer and closer to the end of the October 20, 2023, expiration cycle. If our positions act accordingly, we have the opportunity to bring in 5% to 10% worth of call premium over the next 26 days.

Earnings are due to officially begin in just over two weeks with the big banks reporting. Until then, the market gods offer up the liveliest week of the earnings doldrums with several potential opportunities, most notably in COST (COST), Micron (MU) and Nike (NKE). I’ll take a closer look at a potential Costco trade In this week’s Trade Ideas section.

It was a somewhat ugly week for the market as the Federal Reserve continued to push its hawkish agenda and the bond market reacted violently. By week’s end the S&P 500 had lost 2.93%, the Dow had fallen 1.89%, and the Nasdaq had declined by 3.62%.

It was a somewhat ugly week for the market as the Federal Reserve continued to push its hawkish agenda and the bond market reacted violently. By week’s end the S&P 500 had lost 2.93%, the Dow had fallen 1.89%, and the Nasdaq had declined by 3.62%.

The market remains in a two-month correction, but as opposed to the sloppy action seen in recent weeks, the sellers are now starting to pounce, damaging even the resilient big-cap indexes. Longer-term, we still believe the next major move is likely to be up, but we can’t ignore what’s in front of us: We’ve been cautious for weeks, and earlier today on a special bulletin, we pared back on two of our current positions, which will leave us with a cash position in the low 50% range.

In tonight’s issue, we give you our latest thoughts on just about everything -- our stocks, the market, the big picture and interest rates, which, after two years, are still one of (if not the) key drivers of the market. There will be a sustained advance that comes out of all this, but we continue to think patience is the name of the game for now.

As part of our ongoing “Core & Explore” approach, today I present three new ETFs for your consideration. These three funds should help you weather the market’s many ups and downs these days. They are designed to remain both in the market and keep flexible to take advantage of new growth opportunities without going overboard.

In the September issue of Cabot Early Opportunities, we look into what this afternoon’s Federal Reserve meeting could mean for the market. Then we dig into five small-cap companies from the industrial, biotech, software and clean energy markets. There’s something for everybody.

Enjoy!

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.

Stocks chopped up and then down last week, and all told, not much has changed—the market is still in the throes of a two-month correction, with a sideways-to-down intermediate-term trend and few stocks moving in a sustained way on the upside; simply put, there’s little money being made right now. That doesn’t mean we’re in the storm cellar—we’re OK having a few lines in the water and starting some small positions in potential leaders as the odds favor the next big market move being up. But overall, a cautious stance is warranted given the evidence. We’ll leave our Market Monitor at a level 6.

This week’s list has something for everyone, with a variety of sectors and setups represented. Our Top Pick is an old name, but it’s cheap, strong and has an AI infrastructure angle that should keep buyers interested. Try to buy on weakness.

It has been a bullish weekend for crypto after SEC Chairman, Gary Gensler, issued a statement saying that Bitcoin and Ethereum should be regulated by the Commodities and Futures Trading Commission (CFTC), while “tokens” or cryptocurrencies that share the characteristics of equities should be regulated by the Securities and Exchange Commission (SEC).

Earnings season is over, although it starts again on October 13 with Walgreens Boots Alliance (WBA). Today’s note includes a summary of the podcast.

The broad market pulled back 7% in the week after Fed Chair Jerome Powell’s Jackson Hole speech and small caps did a little worse, drifting as much as 10% lower as of Tuesday’s close. But the last couple of days have been better, setting up what could be a little relief rally next week.

Of course, the CPI numbers (to be released next Wednesday) will likely dictate broad market movement in the back half of the week (they should show continued moderating inflation).

Markets continue to at best tread water. Yesterday, markets performed better as the Nasdaq Composite ended a seven-session streak of declines.

Kraken Robotics (KRKNF) shares were up 20% in their first week as an Explorer recommendation as the company signed a follow-on contract to supply additional KATFISH™ for the NATO Navy’s new mine hunting vessels.

The market has closed lower for three straight weeks and declined about 9% from the August high as we head into September. Where do we go from here?

The market is having trouble deciding. It’s still unclear what the primary threat or driver will be. Is the main problem inflation or recession? It remains to be seen if inflation has indeed peaked and if it’s headed lower. The state of the economy is also unclear. Is this a recession after two consecutive quarters of GDP contraction? It is also an open question if the economy remains buoyant or is declining from here.

Three straight weeks of market declines have moved the S&P 500 down 8.9% from the mid-August high. The selling is continuing this first day after Labor Day, so far.

It’s our old friends inflation and recession causing trouble. The market increasingly fears recession as the hawkish Fed raises rates to tame inflation and investors anticipate a hard landing. The weakness may continue in the weeks ahead, as September is historically the worst month of the year for the market.

This week, we had limited news but there was one update that I wanted to highlight:
RediShred (RDCPD) completed a reverse split on August 18th. For every five shares that you previously owned, you now own one share. The stock price adjusted up to account for the reverse split. The reverse split has no economic impact on RediShred. You still own the same percentage of the company.

ENS domains are now the top traded NFT collection, according to the leading NFT marketplace OpenSea.

ENS (Ethereum Name Service) trading volume is rising at a 43% week-over-week clip despite other NFT projects falling in value.

While metals like lithium and uranium remain buoyant, gold is still in the proverbial doghouse despite having several good reasons to strengthen. This consideration has prompted investors to wonder what exactly it will take to turn the yellow metal around.

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

Some bad news surrounding many chip firms had the market down decently today, though the buyers did support stocks as the day wore on. At the close, the Dow was up 146 points, though the Nasdaq still finished lower by 31 points.

We are moving shares of Altria (MO) from Buy to Sell. While the shares remain 21% below our $66 price target, the risk/return trade-off has become unfavorable.

We’ve held on to a small stake in Endava (DAVA) hoping the market would turn around before our gain dwindled too much.

CS Disco (LAW) reported Q1 numbers that surpassed expectations. Revenue rose 63.5% to $34.5 million (beating by $3.8 million), while adjusted EPS of -$0.15 beat by $0.06.

Today we are adding Arista Networks (ANET) to our Watchlist.

There’s no doubt about it: this market stinks.


Every major index has been hitting new lows, the news is terrible (raging inflation and soaring interest rates), and investors have grown increasingly fearful, as the profits of 2021 have quickly evaporated in the bear market of 2022.

Xometry (XMTR) delivered quarterly results ahead of expectations this morning.

We launched Cabot SX Crypto Advisor during a time of extreme global uncertainty.

Earnings Updates: Shockwave (SWAV) Remains a HOLD. TaskUs (TASK) Moves to SELL.

Based on market conditions and to limit losses, I suggest you sell the following two Explorer recommendations:

We’re going to take profits on Archaea Energy (LFG) today, after shares tripped our stop-loss of ‘under 20’ with a close at 19.80 Monday. We should book a profit of around 8%. There is more support for LFG below here, particularly at 18.70, but with sectors broadly breaking support levels yesterday, we prefer to get out with a profit now.

They say markets don’t bottom on a Friday. Today’s weakness is showing that old adage to be true yet again.

Sell Silvergate Capital (SI)

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.