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Ahead of a monster week of economic data and earnings releases the S&P 500 fell 0.85%, the Dow lost 2.6%, and the Nasdaq gained 0.4%

It’s been a bit of a wobbly week, with most major indexes in the red and more than a few leading stocks easing lower after solid runs. Coming into today, the big-cap indexes are off less than 1%, growth measures are generally off 1% to 2% and some broader indexes (small caps, etc.) are off a bit more.

Led by an awful week for the Semiconductors (down 11%), the S&P 500 fell 3.62% last week, while the Dow lost 2.42%, and the Nasdaq dropped another 5.5%.

Current Market Outlook


As expected, we’re seeing a ton of day-to-day volatility in the market—last week the Nasdaq spiked higher by nearly 300 points in less than three days, only to give it all back since Thursday. But net-net, we really haven’t seen any change in the market’s picture, as the intermediate-term trend is pointed down for most indexes, sectors and individual stocks. The good news is that, as expected, earnings season has revealed a nice crop of potential leaders that are acting resiliently—this week’s list has a bunch of them to consider. But remember that, in a weak market, good-looking stocks can go bad in a hurry, which is why we advise holding a bunch of cash, and if you buy, you should keep positions very small and look to enter on weakness. We’re keeping our Market Monitor at a level 4 in today’s issue.

This week’s list is chock full of earnings winners, which, encouragingly, are generally holding up well despite the market’s latest slide. Our Top Pick is Etsy (ETSY), whose growth is picking up steam and stock is acting great.

Stock Name	Price	Buy Range	Loss Limit
Alteryx (AYX)	132.78	53-56	47.5-49.5
BioTelemetry Inc. (BEAT)	58.58	59.5-62.5	54-56
CyberArk (CYBR)	111.74	73-75	67.5-69.5
Dexcom (DXCM)	421.36	138-142	127-130
Etsy (ETSY)	112.97	49-51	43-45
Genomic Health (GHDX)	64.42	77-80	67-69
Horizon Therapeutics (HZNP)	49.89	20.5-21.5	19-19.5
The Mosaic Company (MOS)	29.22	34-36	31.5-32.5
Twilio (TWLO)	183.39	81-85	73-75
Ulta Beauty (ULTA)	331.95	298-305	278-280

The market remains in a rough spot, with a hawkish Fed that continues to raise rates into what’s become a rolling bank crisis, with some big names going under and others walking the plank. Far more important to us than the news is the market’s reaction to the news--and it remains mixed when it comes to the indexes (intermediate-term trend neutral), but growth stocks remain iffy at best, with many good-looking setups falling apart on earnings of late, and with relatively few really powering ahead. All of this can change in a hurry, but until it does, we continue to think growth investors should remain generally cautious and flexible as we wait for a more certain environment that will entice big investors to pile in.

In tonight’s issue, we have no changes to the Model Portfolio (though one small position is on a tight leash), holding north of 60% in cash and working on building our watch list. Elsewhere tonight, we write about the market’s very narrow nature, highlight the housing group (which has a history of trending even in bad markets) and have re-added a few names back to our watch list after some old favorites have popped on earnings.

We briefly discuss our thoughts on valuation and raise our price target on shares of a consumer staples company and introduce a new Buy rating on a retail company.

Specialty Industrials Shine. RBC and APGE Updates

FTAI Aviation (FTAI) Reports

Halloween was Monday, but it seems like the stock market has been playing tricks on investors all year.

Earnings Season – Second quarter earnings season began late last week. Your brokerage firm probably provides quarterly earnings estimates on a thousand stocks. Call your advisor or use their website chat box to find out where to locate the quarterly earnings estimates.

This week we are adding Alcoa (AA), which has held up very nicely during the recent market malaise.

After falling 4-6% two weeks ago, the S&P 500 and Nasdaq bounced back by 2-3% last week. Quite the whipsaw! By week’s end the S&P 500 had gained 2%, the Dow had risen marginally, and the Nasdaq had added 3.3%.

Before we get into this week’s idea we need to clean up a couple of positions from April expiration last Friday. This is what we are going to do …

Sell FROG Stock
Sell HOOD Stock
Sell IOT Stock

Stepping back, we are closing our FROG and IOT positions for losses, while HOOD will be closed at its max profit.

When we last were in touch on Monday, the market had found some encouraging support after the initial gap down on the Iran attacks—but as the week has worn on the evidence has clearly wilted some, with mostly down action and with high relative performance stocks sagging. At this time, our intermediate-term trend model is on the fence, though it could flip to negative depending on how today goes.

To be fair, it’s not a clear-cut disaster out there at this point. The big-cap indexes are still trying to hold recent lows (again, we’ll see how today goes), and some secondary factors are intriguing—the number of stocks hitting new lows has actually dried up (some buying in beat-up names has occurred while they sell some stronger issues), and defensive stocks (led by consumer staples) have been hit hard, down more than 5% on the week.

Aided by a strong week for the market following the Federal Reserve interest rate cut, our three September covered calls (SFM, CPNG, SG) expired for profits ranging from 4.62% - 6.25%.

This week we turn our attention to the October expiration cycle via a covered call sale in a grocery delivery play that is breaking out to new highs.

Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.

We’ve seen a handful of yellow flags for a while now, from weakening breadth to an increasing number of breakdowns and more, and last week the market saw a good-sized wobble—before support showed up where it was “supposed to” last Friday, with many high-relative-strength stocks also holding.

Note: Due to the Labor Day market holiday next Monday, you will receive your next Cabot Profit Booster issue on Wednesday, September 4.

Before we dive into this week’s covered call idea, we need to address our four August positions that expired a week ago.