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First off, due to our regular schedule (two weeks off all year), there will be no Top Ten next Monday (November 22), though we will likely do a Movers & Shakers update pre-Thanksgiving.

Onto the market, big picture, we remain quite bullish, but near term, we think there’s the possibility of further shenanigans—we’re seeing a few stocks crack key levels, and with most measures of sentiment showing complacency/giddiness, more pain could be in store to raise the discomfort level. We advise following the tried-and-true method of holding your strong, resilient stocks, while keeping stops in place on names that are beginning to wobble. We’re pulling our Market Monitor back down to a level 7 to respect the recent iffy action, though we still think the next big move is up.



This week’s list has a lot of good-looking charts, including another batch of names that recently reacted well to earnings. Our Top Pick is one of those, with a story benefiting from both housing and long-term growth trends.

Stock Name	Price	Buy Range	Loss Limit
AppLovin Corporation (APP)	103	96-101	83-86
CF Industries (CF)	66	62.5-65.5	56-57.5
Diamondback Energy (FANG)	111	107-112	98-101
Expedia Group (EXPE)	178	174-178	163-165
The Goodyear Tire & Rubber Company (GT)	23	22-23	19.5-20
GXO Logistics (GXO)	99	93-96	84-86
LendingClub (LC)	44	40-42	34.5-36
Livent Corporation (LTHM)	30	28-30	25-26
Seagate Technology (STX)	106	100-104	91-93
Trex Company (TREX)	129	126-130	110-112

The market continued to test new highs last week as the S&P 500 gained 0.71%, the Dow climbed 0.87%, while the Nasdaq broke trend by closing 0.9% lower. That being said, we continue to see thin summer trading led by ongoing sector rotation. Growth waned last week and it was the cyclicals’ time to shine, with the financials leading the way.

The three leading indexes pushed higher this past week as the S&P 500 rose 0.78%, the Dow gained 1.22%, and the Nasdaq added 0.08%.



Following a choppy and volatile start to the week, on Thursday politicians kicked the debt-ceiling can down the road, which seemed to make investors happy, at least for the day. Unfortunately, that investor excitement was short-lived as the September jobs report on Friday came in at 194,000 new jobs added, well under the expectation of 500,000. The market managed to close Friday only slightly lower despite the bad news.

The overall market continues to trade without much conviction at the moment. Last week, the S&P 500 fell 0.37%, the Dow declined 0.36% and the Nasdaq pulled back 1.11%. As I’ve pointed out over the past few weeks, the bullish surge has been somewhat tainted by what has been going on below the market’s surface recently. Ideally, in a bullish environment, we would see healthy participation in most stocks, but that just hasn’t been the case over the past few weeks. As a result, I will continue to take a cautious, but certainly optimistic approach.

Last week the major indices took another small step backwards. The S&P 500 lost 0.57%, the Dow fell 0.06%, and the Nasdaq declined 0.41%.



The decline deepened among all the major indices Monday as ongoing uncertainties around Chinese property developer Evergrande heightened. Evergrande faces a debt payment on its offshore bonds Thursday, so until some clarity is seen I would expect to see further volatility.



The S&P 500 has now witnessed a 4.4% decline since the closing highs back on September 2. So the 5% pullback everyone has been discussing over the past several weeks could come to fruition over the next few trading sessions.



To be more defensive, this week I am going to sell in-the-money calls to stay a bit on the safe side.

Last week, despite a large market decline on Monday, the major indices took a baby step forward. The S&P 500 gained 0.51%, the Dow rose 0.62%, and the Nasdaq eked out 0.02%.



The advance came despite ongoing uncertainties around Chinese property developer Evergrande and the seemingly hawkish message from the Fed announcement. Now the focus has shifted to Washington, D.C.’s finest and the decision around the debt ceiling and infrastructure. Add a sprinkle of Chinese power concerns and there seems to be just enough worry to keep investors on their toes.

The bulls continued their winning ways last week, but the advance wasn’t without some jostling. Late in the week several leading growth stocks pulled back, but those declines weren’t enough to keep the bulls from another weekly victory.

The S&P 500 gained 0.93%, the Dow advanced 0.78% and the Nasdaq rose 1.11%.



To put this market run into perspective, the current rally has lasted 189 days, basically nine months, without a 5% pullback. Additionally, there have been 43 days of a recorded new high.



So, my stance hasn’t changed too much. I continue to take a cautious but optimistic approach.

Before we dive too deep into this week’s idea I have decided to sell our PureStorage (PSTG) stock position, which will leave us without a stock or option positions, as the stock has not been participating in the recent market rally. This could prove to be a mistake, but I would prefer to lock in our small profit, while at the same time raise some cash for upcoming trades.



Moving on …



The market added to recent gains last week, as the S&P 500 had its best week since July. The S&P 500 rose 1.8%, the Dow climbed 1.6%, and the Nasdaq added 2.2%.



The rally came on the back of better-than-expected earnings from several well-known stocks. The big banks dominated the earnings calendar and the sector’s pandemic-era trading boom fueled the continued bullishness.

Up, up and away! The S&P 500 rose 1.52%, the Dow advanced 0.96%, and the Nasdaq climbed 2.82% last week, aided by Federal Reserve Chairman Jerome Powell’s dovish commentary.

There is no doubt this year’s rally has been one of the most impressive rallies market participants have ever seen. More than 50 new closing highs and over 200 trading sessions without a 5% pullback defines the power and consistency of this rally. And as we have all witnessed, the slightest pullback seems to act as a frenzied feeding ground for buyers.

Fueled by better-than-expected earnings last week the S&P 500 rose 1.6%, the Dow climbed 1.1%, and the Nasdaq added 1.3%.



Despite the strong week, on Friday traders’ enthusiasm for the recent rally faded a bit after Fed Chairman Jerome Powell’s commented that the central bank was “on track” to begin reducing its purchases of assets.



However, Monday the bulls stepped right back in and once again “bought the dip.”



This week brings earnings announcements from key mega-cap tech names Amazon (AMZN), Facebook (FB), Alphabet (GOOG), and Apple (AAPL). There is also a bevy of blue chips reporting including United Parcel Service (UPS), Visa (V), McDonald’s (MCD), Coca-Cola (KO), Boeing (BA), Merck (MRK), Caterpillar (CAT) and numerous others. Brace yourself, it’s going to be exciting!
Energy has taken off lately and I want to add exposure to the sector. However, I still want to maintain a somewhat conservative stance, especially as this week’s pick will report earnings next week. As a result, I will be selling in-the-money calls on hydrocarbon explorer Marathon Oil (MRO).

The first news is the renaming of our advisory, from Cabot Marijuana Investor to Cabot Sector Xpress Cannabis Advisor, which is explained in today’s issue.

While the broad market was falling apart over the past week, several of our cannabis stocks held firm above their December lows, telling us that after an 11-month downtrend, the selling pressures are pretty much spent in that sector.



Today’s issue brings a few tweaks to our portfolio, but no big changes, as we are well positioned for the sector’s next uptrend.



Full details in the issue.

The pandemic induced profound changes in the short term and will permanently alter things to at least some degree for a long time. Such change can create great investments.





One industry that is benefitting from the altered world is shipping. Seaborne shipping stocks have had their best year in well over a decade. Shipping rates have soared amidst the rapid recovery and pent-up consumer demand as well as supply chain disruptions that have limited the number of ships available.





These changes should be long lasting for one industry subsector, container shipping. The torrid rise of e-commerce and technological efficiency should permanently increase demand for container shipping at a time when supply is limited and will remain so for a while.





In this issue I highlight a container shipping company that is growing earnings at better than a 100% annual clip, sells at a still cheap valuation, and currently yield 6.7% with a dividend that should continue to rise in the years ahead. The stock could have a lot further to rise in the year ahead.

As a result, this week I’m adding a diversified natural resources company based in Vancouver, British Columbia, Teck Resources (TECK), though because of the recent market weakness, I’m structuring our trade defensively.

The market remains challenging and divergent, and few growth stocks look ready to start a sustained upmove just yet. But the evidence has slowly improved since the start of the month, including the fact that our Cabot Tides (which have admittedly been on-again, off-again of late) have returned to a bullish stance. We don’t think it’s time for a major buying spree, but we are putting some of our large cash hoard to work by filling out one of our positions and starting a small stake in a new, resilient growth name. Last but not least — all of us here at Cabot wish you and yours a happy, healthy and prosperous New Year.

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

Don’t expect this volatility to subside this week, as the Federal Reserve, economic data releases and a heavy earnings calendar will have traders on their toes.
This week, in an effort to keep the portfolio diversified, I’m adding a pharmaceutical play, AbbVie (ABBV).

While some major indexes are hanging in there and many cyclical areas look pretty good, growth stocks have suffered another sharp leg down, with many with crash-type declines last week. With that said, there are some rays of light, including a minor new lows divergence, continued buying bursts that usually portend solid long-term results and the fact that some cyclical areas are trying to get going from big consolidations. Monday’s panic selling might be a workable low, but still, we need to see more before putting much money back to work.

This week I’m adding an energy stock engaged in hydrocarbon exploration, Marathon Oil (MRO).

A 10-year Treasury bond pays just 1.4%. A three-year CD pays less than 1%. A 20-year AAA-rated municipal bond pays 1.20%. After taxes and inflation, you don’t even break even. And that’s not to mention the fact that bond prices can plummet if interest rates rise.

The only game in town is dividends. You can still generate high rates from well-chosen dividend stocks and other income-paying securities. It’s nerve-racking to have so many of your investment dollars in the stock market, but with bonds so low paying and treacherous, there is little choice if you need to generate income.



In this issue I highlight an ETF that strikes a more conservative cord than most dividend stocks. It employs a time-tested strategy that has proven to earn consistent high income while generating capital appreciation at the same time. It also pays dividend on a monthly basis and should thrive when the environment normalizes on the other side of the pandemic recovery.



For more great picks and information about navigating the current environment please join me for the 9th Annual Smarter Investing, Greater Profits Online Conference, August 17-19. We have an incredible lineup of experts ready to share their best picks.

This week I’m adding American worldwide manufacturing services company Jabil (JBL) to the portfolio.