The past few sessions have brought an avalanche of news and rumors involving inflation, rumors of China/Taiwan tensions, a worldwide tech shutdown and, this weekend, a shakeup in the 2024 election, all of which have caused some reverberations. At this point, the top-down measures look fine, but there’s no doubt that leading stocks (especially growth stocks) have gotten very sloppy, with a pickup in breakdowns and distribution. All in all, we’ll move our Market Monitor to a level 6 and stay flexible: A strong rebound and some positive earnings gaps could still launch many new leaders, but we need to see the buyers step up in individual names to get more aggressive.

Another piece of good news is that it’s still not hard to find strong stocks with good stories, as this week’s list has names from a variety of areas. Our Top Pick is a big-cap name that reacted well to earnings last week and looks poised to help lead a fresh upturn in its sector.

Dog days of summer? Ha!

Not in the midst of a presidential election with enough drama for an entire season of Game of Thrones, rising U.S.-China-Taiwan tensions, a software failure slowing global commerce to a halt (briefly), two major wars still ongoing, and the Olympics just four days away. It’s enough to cause investors to make rash decisions. So let’s make some sane ones instead by selling two obvious underperforming fallen tech stars and adding a low-drama dividend payer that has a long history of outperforming the market.

It’s all part of today’s busy mid-summer issue. Let’s get started.

Led by a steep decline in the formerly red-hot Semiconductor sector, the market had a somewhat “gross” five-day stretch. For the week, the S&P 500 fell 2.35%, the Dow rose marginally, and the Nasdaq lost 4.35%.

Led by a steep decline in the formerly red-hot Semiconductor sector, the market had a somewhat “gross” five-day stretch. For the week, the S&P 500 fell 2.35%, the Dow rose marginally, and the Nasdaq lost 4.35%.

Markets and especially the tech-heavy Nasdaq index led by semiconductor stocks sold off yesterday. Reasons include perceived rising protectionist and isolationist pressures in both Europe and America. Meanwhile, small-cap stocks continue to rally, and some overseas markets were also up.

As one would expect, our tech stocks pulled back somewhat while all three of our dominator stocks gained ground this week.

In the July Issue of Cabot Early Opportunities, we continue to lean into the strong market and focus our attention on the small end of the market cap curve.

We have small and mid-cap players in the software, semiconductor, green energy, industrial tech and AdTech spheres, each of which has compelling reasons propelling shares higher.

As always, there should be something for everybody.

While I rarely highlight the gains/losses of the Russell 2000 (IWM) as the group has been mostly a dog for the last year-plus, last week the small-cap index came alive on Thursday and Friday, far outpacing its index peers with a gain of 5.25% on the week.

And while the other indexes couldn’t keep up with the IWM, the S&P 500 gained 0.8%, the Dow rallied 1.5%, and the Nasdaq fell 0.35%.

While I rarely highlight the gains/losses of the Russell 2000 (IWM) as the group has been mostly a dog for the last year-plus, last week the small-cap index came alive on Thursday and Friday, far outpacing its index peers with a gain of 5.25% on the week.

And while the other indexes couldn’t keep up with the IWM the S&P 500 gained 0.8%, the Dow rallied 1.5%, and the Nasdaq fell 0.35%.

While I rarely highlight the gains/losses of the Russell 2000 (IWM) as the group has been mostly a dog for the last year-plus, last week the small-cap index came alive on Thursday and Friday, far outpacing its index peers with a gain of 5.25% on the week.

And while the other indexes couldn’t keep up with the IWM the S&P 500 gained 0.8%, the Dow rallied 1.5%, and the Nasdaq fell 0.35%.

We rarely draw major conclusions from a couple of days of trading, but there’s no doubt the action since last week’s inflation report is very interesting, with the broad market coming alive, though that’s happening as some extended tech leaders wobble a bit. All in all, the intermediate-term trend is turning up and we are seeing a few more names emerge, though to us, it remains a stock-by-stock environment, so we’re focused on great setups and potential breakouts in stocks showing relative strength. We’ll leave our Market Monitor at a level 7.

This week’s list is very eclectic, with everything from precious metals to bull market stocks to AI plays to biotech—a sign the broad market is kicking into gear. Our Top Pick is a mid-cap in the biotech space with very strong sales and earnings projections as their new drug grows rapidly.

The bull market finally expanded to more than just a select few names last week, with small caps, Chinese stocks and other sectors finally getting some love. It’s a good sign for the rally’s longevity and could be a boon for our diverse portfolio. So today, we add another non-AI, non-tech stock that’s been attracting some overdue buying. It’s a big-name, resilient growth company whose stock consistently outperforms the market – and yet is undervalued at the moment. It’s a recommendation I just shared with my Cabot Value Investor readers, and today it joins our Stock of the Week portfolio.

We’ve been around a while, but this is one of the most unusual environments we’ve seen, with today’s major rotational action another example of a pickup in volatility while few names are really making much sustained progress. Taking things on a stock-by-stock basis, we’ve pared back some in recent weeks, yet because most of the names we’ve been targeting for buying are just sitting there, has led to an increasing cash position--now up to 41% after a partial sale of Cava Group earlier this week.

The good news is that the mostly sideways action from much of the market has led to many setups heading into earnings season, which results in a straightforward game plan -- we’re holding our cash tonight, but we’re aiming to grab some fresh breakouts if they occur.

The rally that began in November is slowing down, but not dying.

Things are still good. Inflation is falling, the Fed is probably done hiking rates, longer-term rates have peaked, and the economy is still strong. But it’s that time of year. The holidays have a way of taking investor focus away from the market. Stocks tend to do whatever they were doing when investors stopped paying attention, which in this case is edging higher ever so slowly.

There were no earnings reports or ratings changes this week.

WHAT TO DO NOW: Continue to lean bullish, though keep an eye on things in the short term. Overall, our indicators look very good, so we’re aiming to put more money to work—but near-term, we are seeing a few warning signs, so we’re picking our spots and stocks carefully. On yesterday’s special bulletin we sold Noble (NE) and added another half position in PulteGroup (PHM), but tonight, we’ll stand pat and see how things go in the coming days. Our cash position is now 36%.

The superb rally that began after October is fading.

November was the best month for the S&P 500 in over a year. But now some reality is starting to set in. Wall Street took the good news about peak interest rates to another level and started pricing in Fed rate cuts early next year. The market is pulling back after the Fed dismissed that notion.

The market had a great November. But the rally petered out.

Wall Street always overdoes it. It took the good news about peak interest rates to another level and started pricing in Fed rate cuts early next year. The market pulled back on Monday because the Fed dismissed that notion.

In today’s note, we discuss the recent earnings reports from Duluth Holdings (DLTH) and Kohl’s (KSS). Our note also includes the monthly Catalyst Report and a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday.

With the market on track to post a very nice gain in November, it’s been a good time to just sit back and let most stocks do their thing. Much of this move has been driven by lower yields and peak Fed chatter, with inflation and economic data largely supporting the disinflation and soft-landing scenario.

Whether or not the Fed will ultimately begin to cut rates next spring/early summer remains to be seen, but that’s what the market is currently expecting. We’ll now look to the December 12/13 FOMC meeting (last of the year) for Jerome Powell to repeat his “not thinking about thinking about cuts” shtick.

Many analysts now expect a “Goldilocks scenario,” with the economy growing nicely but not too fast. This would mean that the Fed does not need to worry about raising interest rates further to combat inflation. Good news for stocks.

I would like to clarify there are two reasons that I remove a stock as an Explorer recommendation. When I recommend a stock, I expect that it will deliver appreciation and dividends over the long haul unless I highlight that it is a more of a short-term trading opportunity.

The strong November rally has sputtered out with the S&P 500 up 8.7% for the month so far. Is that the end of this upside leg?

The month started with a bang after the Fed indicated it was done hiking rates, and jobs and inflation numbers seemed to confirm Wall Street’s opinion that interest rates have peaked. The benchmark ten-year Treasury tumbled all the way from 5% at the end of October to 4.34% at midday on Tuesday.

The strong November rally slowed down last week but it’s still very much alive. The S&P 500 closed last week up 8.7% for the month and the good times might continue.

The current belief in peak interest rates and a “soft landing” has investors still in an optimistic mood. The VIX, known as the market’s fear gauge, hit the lowest level since January 2020 last week. Any piece of good news could ignite a further rally with the current kindling.

The best poker players usually are stone-faced. That means that they show no emotions, make no unusual or unplanned moves, and most important, have no “tells.” A “tell” is any change in a player’s behavior, attitude or other actions that indicate the strength of the cards they hold in their hand. Common tells are changes in their chatter, eye contact, twitches and frequency of checking their hole cards.

WHAT TO DO NOW: Continue to put money to work, albeit in a step-by-step fashion. From a top-down perspective, our market timing indicators continue to improve, with all three of our key measures (Trend Lines, Tides, Two-Second) now positive. Individual growth stocks are acting well, though many are still repairing the damage of the past few months. Thus, we’re optimistic, but want to see continued improvement to pull us into a heavily invested position. In the Model Portfolio today, we’re going to buy a half-sized position in Arista Networks (ANET) and add another 3% stake to Duolingo (DUOL), leaving us with around 44% in cash.

The broad market is getting whacked today after holding up relatively well in the face of rising bond yields. The reasons behind why bonds are selling off and yields are rising is beyond the scope of our discussion today. But suffice to say there are forces at work that are more complex and nuanced than a simple “Fed says higher for longer so yields are rising.” The recent spike in the 10-year yield may well have more to do with the federal deficit and supply/demand dynamics. So yeah, beyond the scope.

We allowed our BITO calls to expire worthless last week. As a result, we locked in a return of 3.4%. Now it’s time to sell more call premium against our BITO shares. We have managed to reap a total return of just over 105% since introducing Income Trader 16 months ago.

With November expiration only 49 days away, and with implied volatility kicking up over the past week, at least a little, I want to sell some premium. So, I’m going to start with another bear call spread in SPY and add some additional positions over the coming week.

WHAT TO DO NOW: The market’s action of late is encouraging for sure, but there’s still more work to do with our Cabot Tides and growth funds. Today we’re going to sell our small remaining position in DoubleVerify (DV) and hold the cash—with an eye toward redeploying the funds in the near future should the market and individual stocks continue to firm up. Our cash level will now be around 45%.

We allowed our calls to expire worthless last week, thereby reaping the entire call premium. As a result, it’s time to start selling more call premium.

We have a few positions with calls due to expire tomorrow, so let’s get ahead of it and buy back our short calls and immediately sell more calls to collect another round of premium.

WHAT TO DO NOW: The market’s action of late is encouraging for sure, but there’s still more work to do with our Cabot Tides and growth funds. Today we’re going to sell our small remaining position in DoubleVerify (DV) and hold the cash—with an eye toward redeploying the funds in the near future should the market and individual stocks continue to firm up. Our cash level will now be around 45%.

As expected, the Federal Reserve elected to hold the Federal Funds Rate (FFR) steady today (at 5.25% to 5.5%) and also increased their projection for the FFR for 2024 from 4.6% (in June) to 5.1%. This is consistent with the “higher for longer” mantra.

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.