Our Cabot Insider Edge portfolio is up 17.35% compared to 4.56% for the S&P 500 exchange-traded fund (SPY) since inception on June 10, 2026, despite the headwind of a cash position.

This is positive performance, but I’m resisting exuberance. I remain somewhat cautious on the markets, which appear to be vulnerable to a pullback for the reasons I have been stating.

Mattel (MAT) is a name that needs no introduction; indeed, most of us probably owned one or more of their products at some point in our childhood. Even today, it ranks as one of the largest and most prominent toy and entertainment franchises in the entire world.

While the company continues to manufacture and sell physical toys—including perennially popular Barbie dolls and Hot Wheels cars, Fisher-Price toys and Thomas & Friends merchandise—it’s currently in the midst of a potentially massive transition: Mattel will continue to make toys, but it’s undertaking a critical transformation into becoming more of an intellectual property (IP) and media franchise operator.

The market has been solid. But it’s near the high. And things could get dicey after Labor Day. After Labor Day, what will cranky, sobered-up investors see?

They’ll see high oil prices and the highest interest rates in over a year. The price per barrel of oil closed last week above $85 after dipping below $70 at the beginning of July as tensions with Iran have increased. But a more stunning development is interest rates. The 30-year Treasury rate hit the highest level since 2007. The benchmark 10-year rate at 4.7% is at the highest level since the beginning of 2025.

That’s harsh. High prices and interest rates aren’t good for stocks. Anything can happen, of course. Perhaps the Nvidia (NVDA) earnings report this week will reignite the AI trade. Maybe the Iran situation will get resolved soon. But there seems to be more reason for caution than optimism in the market right now.

It’s not a great time to be buying stocks. It’s a much better time to take advantage of stocks that have risen near the highs, particularly in the energy and health care sectors. There are high call premiums to be had while the getting is still good in certain stocks. In this issue, I highlight two high-priced covered calls for stocks that have rallied and are still basking in the glow of summer, before Labor Day comes.

Before we dive into this week’s covered call idea, we need to clean up one position from August expiration.

While we walked away from DK and CBRL for full profits on Friday, AAL stock closed below our strike price, which means the call we sold expired worthless, leaving us with our stock position. Let’s sell to exit this trade.

To execute this trade you need to:
Sell AAL Stock

There’s still more good than bad evidence out there, which has us leaning bullish—but net-net, there isn’t a lot of money being made, with most indexes unchanged over the past many weeks and with few stocks running away on the upside. Overall, the action sets up a straightforward game plan: If the market can show serious accumulation from here, we think the rally could go far, but much more downside from here would tell us the market needs time before getting going. We’ll leave our Market Monitor at a level 7 here, but the next few days should be telling.

This week’s list is a mixed bag, with everything from commodities to gold to health care. For our Top Pick, we’re going with one of the stronger names in a group that’s seen many breakouts of late, and the company itself had a game-changing merger earlier this year.

Stocks had their first bad week all month, though it’s possible an extended slump is in order between late-summer malaise setting in, sky-high bond yields, second-quarter earnings season winding down and the Iran war not going away. As a result, it may be more of a stock picker’s market in the coming weeks, so today we add a stock that’s finally getting a boost after getting torn apart for the last year thanks to some intriguing insider buying. It was enough to grab the attention of Michael Brush, Chief Analyst of our new Cabot Insider Edge newsletter, who added the stock to his portfolio earlier this month. Now, we add it to the Stock of the Week portfolio.

Details inside.

Wall Street spent last week digesting a sharp selloff in chipmakers, a jump in long-dated Treasury yields to multi-decade highs, and a rough post-earnings drop in Walmart shares, all of which combined to knock stocks off their recent record highs. The Treasury Department’s mid-week announcement that it would more than double its long-term debt buybacks helped calm the bond market (briefly) and set up a small Friday rally, but it wasn’t enough to erase the week’s losses. For the week, the S&P 500 fell 1.4%, the Dow dropped 0.8%, the Nasdaq led the declines with a drop of 2.1%, and the Russell 2000 slipped 1.6%.

Wall Street spent last week digesting a sharp selloff in chipmakers, a jump in long-dated Treasury yields to multi-decade highs, and a rough post-earnings drop in Walmart shares, all of which combined to knock stocks off their recent record highs. The Treasury Department’s mid-week announcement that it would more than double its long-term debt buybacks helped calm the bond market (briefly) and set up a small Friday rally, but it wasn’t enough to erase the week’s losses. For the week, the S&P 500 fell 1.4%, the Dow dropped 0.8%, the Nasdaq led the declines with a drop of 2.1%, and the Russell 2000 slipped 1.6%.

Wall Street spent last week digesting a sharp selloff in chipmakers, a jump in long-dated Treasury yields to multi-decade highs, and a rough post-earnings drop in Walmart shares, all of which combined to knock stocks off their recent record highs. The Treasury Department’s mid-week announcement that it would more than double its long-term debt buybacks helped calm the bond market (briefly) and set up a small Friday rally, but it wasn’t enough to erase the week’s losses. For the week, the S&P 500 fell 1.4%, the Dow dropped 0.8%, the Nasdaq led the declines with a drop of 2.1%, and the Russell 2000 slipped 1.6%.

After a rough two months for growth stocks, the late July/early August rally started off well, and we put some of our huge cash position to work. But one swallow doesn’t make a summer, and after a few good days, the market stalled out and, recently, has been backsliding, pulling growth stocks with it. That’s not the end of the world--there’s still more good evidence than bad--but we want to see buyers re-appear before putting any more of our 47% cash to work.

In the meantime we’re monitoring our stocks and keeping our watch list fresh -- a show of strength could have us taking a swing at more new names, but we don’t want to jump the gun.

The August issue of Cabot Early Opportunities keeps it simple by focusing on three companies with compelling growth stories supported by improving fundamentals.

Whether it’s an industrial distributor benefiting from a broader manufacturing recovery, a precious metals producer with a self-funded growth pipeline and hidden strategic minerals upside, or a communications software company finding new life in the AI era, these businesses all have impressive momentum.

All the details are in the August issue of Cabot Early Opportunities.

Wall Street kept its record-setting summer alive last week, with the S&P 500 and Nasdaq both stringing together a third straight winning week as cooling inflation data eased worries the Fed might need to hike rates again. For the week, the S&P 500 gained 0.4%, the Nasdaq added 0.1%, the Dow slipped 0.6%, and the Russell 2000 was the standout, rising roughly 1.1% to fresh record territory.

Two months ago to the day, a pair of holdings in our Growth & Income Portfolio – Dick’s Sporting Goods (DKS) and Harmony Gold Mining Co. (HMY) – were headed in opposite directions.

Dick’s, the sports apparel retailer with locations all across America, was riding high, finishing the day at 239 a share on August 26 – seemingly closing in on our 250 price target.

Harmony Gold, on the other hand, couldn’t get going, with shares trading in the 15s, down from highs above 26 in January as gold and metals prices had plummeted since the onset of the Iran war.

Fast forward to this week, and it’s a very different story.

What happened to the summer? It’s the last days of August already!

I can’t believe it’s already time to talk about the post-Labor Day market. But that’s where we are. Most investors stop paying attention and focus on squeezing in the last bit of summer before it’s gone. Markets usually don’t do much. But that changes after Labor Day.

With the peak of the latest earnings season over and quarterly reports winding down, it’s clear that the season was bullish for most companies. However, the “disconnect” between the market’s expectations and reality was so extreme at times that it produced some massive swings in both directions.

The Q2 season saw 85% of S&P 500 companies that reported results beat estimates versus a long-term average of 76%, along with earnings surprises of 31% versus a long-term trend of 5.2%, according to Barclays.

After another furious, AI-led run-up sent all three major indexes to new record highs to start the month, stocks have sagged in the back half of August, at least so far. There is no shortage of reasons why.

For starters, second-quarter earnings season is largely in the rear-view mirror, save for a few key reports (namely Nvidia (NVDA) next week), meaning the market no longer has the flotation device of 50%-plus earnings growth (!), which was the average among the 88% of large-cap companies that have already reported. That’s the highest year-over-year earnings growth since the Covid-skewed second quarter of 2021 – and is largely unprecedented when the U.S. economy is not emerging from a recession. Absent all those jaw-dropping earnings results, there is no obvious catalyst to send stocks higher right now.

It has been a mildly choppy week for the market, with the major indexes not moving all that much. From last Wednesday’s close through yesterday’s close, the S&P 500 and S&P 600 were both down about 1%, while the Nasdaq slipped 2%.

Under the surface, however, there has been a meaningful rotation. Momentum stocks lagged, several recent winners gave back ground, and money moved into areas like biotech and precious metals.

U.S. Treasury intervention in bond markets eased yields, boosting stocks, gold, and even Bitcoin yesterday. Nevertheless, stubborn inflation, high oil prices, geopolitical uncertainty and surging demand for capital from both companies and governments are all clear trends. This is leading to higher bond yields and a bit of a headwind for stock markets as the U.S. Federal debt is expected to reach $40 trillion this week.

The market started the week in fine shape. But there are some warning signs flashing this week.

The S&P 500 closed last week within a whisker of the all-time high and up 13.7% YTD. The recent upside has been driven by spectacular earnings.

All is fine in the market at this point. The S&P 500 is within a whisker of the all-time high and up 13.7% YTD. But where do we go from here?

Earnings have certainly been a powerful force in lifting stocks recently. It’s been a spectacular quarter for corporate profits. According to FactSet, with more than 80% of S&P 500 companies having reported, second-quarter earnings growth for the average company is on pace to rise 50% over last year’s second quarter. It’s the highest earnings growth since 2021 and virtually unprecedented outside of recessionary rebounds.

If you get the feeling that more people are talking about the potential for a coming stock market crash, you’re not imagining it.

As it turns out, there has lately been a discernible increase in news sites and blog posts talking about a possible bearish turn for stocks in the coming weeks and months.

WHAT TO DO NOW: The market rally is in good shape, with our trend-following measures positive and more growth stocks acting well. That said, our Aggression Index is still neutral, and most indexes are moving sideways after the initial late-July/early-August rush higher, so we’re not flooring the accelerator quite yet. In Monday’s bulletin, we sold Clear Secure (YOU) while adding half-sized stakes in Hinge Health (HNGE) and Cloudflare (NET), and tonight we’ll make one small move, averaging up in Snowflake (SNOW) by adding another 3% stake. That will leave us with around 45% in cash. Details below.

As earnings season begins to wind down, the main takeaway is that it’s been an excellent reporting season and, by and large, companies that are executing well are being rewarded.

In a post yesterday, Ed Yardeni described the season as “fabulous,” noting that with 90% of S&P 500 companies reporting, earnings and profit margins have broadly exceeded analyst forecasts. He also raised his 2026 and 2027 S&P 500 earnings estimates, citing what he calls “Fabulous Earnings Momentum,” or FEMO.

The market is still dealing with plenty of crosscurrents, from elevated rates and lingering inflation concerns to geopolitical uncertainty in the Middle East.

But the biggest takeaway from the last few weeks is straightforward: Fantastic earnings results are pushing the market higher.

A torrid August for gold and metals has pushed shares of Harmony Gold (HMY) above our 23 price target! This morning’s 6% surge in HMY shares – likely on gold prices pushing past $4,600 an ounce for the first time since May – has pushed the gold and copper stock to the mid-23s. With the stock now trading at 2.7x sales and more than 4x book value – and with the August 27 earnings report potentially doing more harm than good, since it’s very possible a better-than-expected quarter is already priced in – it’s time to “Retire” HMY from our Growth & Income Portfolio.

WHAT TO DO NOW: The market remains mostly stuck in the mud, with most major indexes not making any net progress for 12-plus weeks. And growth stocks are mixed at best, as our Aggression Index continues to languish. We’re not making any new buys or sells, but given the lackluster action, we’re going to place two names—Palo Alto (PANW) and Cloudflare (NET)--on Hold and use reasonable stops from here in case the lackluster action continues.

Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.

The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.

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 Momentum 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 Momentum Trader features.