Three out of our five positions in the Income Wheel Portfolio are due to expire this week. Two out of the three positions (GDX, KO) should reap nice profits while the third position, Wells Fargo (WFC), will most likely see a loss for this expiration cycle. However, due to our strategy, we’ve built a nice 17.09% cushion to absorb any hiccups along the way, and given the near-term woes in the banking sector, I would consider the recent decline in WFC a “hiccup.” So much so, that there is a good chance we add another bank stock to the mix this week for a short-term trade.

Despite ongoing banking fears, impressively the S&P 500 gained 1.26% last week, while the Dow rose by 1.48% and the Nasdaq added 1.14%. How this situation will play out this week is a complete toss-up, though I have to say I’ve been impressed by the resiliency of the bulls in the face of bad news … for now!

Despite ongoing banking fears, impressively the S&P 500 gained 1.26% last week, while the Dow rose by 1.48% and the Nasdaq added 1.14%. How this situation will play out this week is a complete toss-up, though I have to say I’ve been impressed by the resiliency of the bulls in the face of bad news … for now!

The market has a split tape right now -- on one hand, the broad market is very weak, led lower by the horrid financial sector, but on the other hand, many growth indexes and individual stocks are hanging in there ... with some actually stretching higher. We’re certainly not going to ignore our market timing indicators (Cabot Tides and Two-Second Indicator are negative), but it’s hard to ignore the action in growth, either, especially after last year’s bear and lots of bottoming action. Thus, tonight, we’re adding two half-sized stakes in potential new leaders, but also holding a bit more than half the portfolio in cash.

Elsewhere in the issue, we write about the action of interest rates (likely longer-term positive) and the resilience of growth stocks, along with a full watch list and some new enticing ideas. All in all, we remain flexible, but are still mostly cautious given the evidence.

I think the 0.25% raise by the Fed yesterday will be followed by a pause. Won’t it be nice when stocks fluctuate primarily around company performance rather than actions by the Fed? Elsewhere, Xi and Putin meet in Moscow in a sign of solidarity and challenge to the U.S. and the West. Novo Nordisk (NVO) is up 10 points this week while today we have a new emerging market recommendation from a country with one of the strongest currencies of 2023.

Now that was an interesting week, as countless sectors imploded (banks/REITs/airlines/energy) while at the same time money rushed into mega-cap technology. By week’s end the S&P 500 had risen 1.43%, the Dow had fallen 0.15%, and the Nasdaq way outperformed, having gained 4.41%.

The market remains mostly weak and very news-driven, and because we’re not ones to catch falling knives, we continue to advise a cautious stance. The one meaningful ray of light we’re seeing is the resilience of big-cap indexes in general and many growth stocks in particular, including a bunch of recent Top Ten names—lots of growth titles are holding up in fine fashion, which isn’t normally something you see at the front-end of a sustained decline. That’s encouraging, though it doesn’t outweigh the other factors mentioned: All in all, we’ll keep our Market Monitor at a level 5, holding a good chunk of cash while we look for signs the buyers are stepping up.

As you’d expect, this week’s list is heavy on the growth side of the equation, though it also has some interest-rate sensitive names as well. Our Top Pick is a well-situated cybersecurity play that’s trading tightly despite the market’s shenanigans.

Banking crisis fears have subsided, and while the fallout from Silicon Valley Bank, Silvergate and Signature Bank simultaneously going under is sure to be felt in the market for weeks and months to come, it’s also not looking like 2008 out there, at least not at the moment. Still, we could use some more safety in the portfolio, and today we add it in the form of a large-cap healthcare giant that’s a reliable dividend payer, boasts one of the industry’s best drug pipelines, and has been outperforming the market for years. It’s a favorite of Cabot Dividend Investor Chief Analyst Tom Hutchinson, who recently upgraded the stock to Buy.

We closed out our DIA bear call spread last week for a 15.74% profit. Another winning trade should put us close, if not above, our all-time highs in the portfolio. This week I intend to add one, if not two trades to the portfolio. My goal is to go out to the April 21, 2023 expiration cycle if possible, but with the April 21 expiration only 32 days away, I might have to go out a bit further in duration. Either way, expect to see several trade alerts as we progress through the week.

Even with some crazy volatility over the past few weeks, not much has changed. We continue to be loaded up in the Income Wheel Portfolio, although I wouldn’t mind stepping into a few new positions. As I stated last week, if I do decide to add a position or two to the portfolio, one will have a low IV and the other will be the exact opposite, with a high IV. The reason, as stated in the past, is that I like to diversify the overall beta of my positions so that our overall level of risk is balanced.

Earnings season is officially behind us. However, that doesn’t mean that we won’t have an opportunity or two rear its head on a weekly basis. This week Nike (NKE) presents a potential opportunity. The options are highly liquid and the IV rank sits above 67. Moreover, we have the ability to create a 31-point range around the expected move of 21 points. We won’t know for certain if a trade will be placed until Tuesday, but all looks promising at the moment as long as the range (or something similar in width) and premium hold up into mid-day Tuesday.

Now that was an interesting week, as countless sectors imploded (banks/REITs/airlines/energy) while at the same time money rushed into mega-cap technology. By week’s end the S&P 500 had risen 1.43%, the Dow had fallen 0.15%, and the Nasdaq way outperformed, having gained 4.41%.

The chances of a recession in the foreseeable future seems exceptionally unlikely. The domestic economy is booming: following last year’s estimated 5.2% growth, the economy is estimated to grow at a 3.3% pace this year. Any further Omicron-related deceleration appears more likely to be a temporary slowing rather than anything more ominous. Bolstering this view: future-watchers expect growth to continue at around a 3% pace in 2023. No recession in sight from their perspective.

As we get towards the end of January, the biggest thing on my mind is the pullback in growth stock. It has been remarkable. According to J.P. Morgan and Bloomberg, the software index is down ~22% from its peak.

The indexes plummeted on rising rate worries and disappointing Goldman Sachs (GS) earnings. The benchmark 10-year Treasury rate soared to 1.85 on Tuesday. That’s the highest level since the pandemic began and up from 1.34% as recently as last month.

Inflation is going on. And it’s starting to sink in. Oil prices are soaring. Interest rates are rising. And the Fed is going to have to be more aggressive than previously anticipated about raising rates and reducing stimulus.

Last year was a stellar one for commodities in general and for industrial metals in particular. Copper, steel, aluminum, nickel and lithium all had stellar gains. There were some declines along the way, but the overall trajectory for the majority of base and semi-precious metals was up.

This week’s Friday Update includes our comments on earnings from Wells Fargo & Company (WFC). We had no price target or ratings changes this week, although we are reviewing Wells Fargo shares as they trade above our price target.

It continues to be a very bumpy ride for small-cap growth stocks, while those names with a slightly more value-oriented profile are providing a somewhat smoother ride. Big picture, there is no doubt the risk-off environment continues. The good news for more aggressive investors is that valuations have come down significantly, as have analyst price targets. That latter point often seems to be one signal that the worst of the selling is in the rearview mirror. Though, clearly, there are many factors in play.

There is this widely held belief that January is a great month for investors. But I always throw cold water on this claim because the fact is, over the past 25 years, it’s been one of the worst months for stocks.

By some measures, Greentech looks more bearish than it has since March last year, with our benchmark Wilderhill Clean Energy Index breaking below support around 70-68.

The U.S. stock market rebounded on Tuesday, following testimony from Chair Powell at his Senate confirmation hearing. Investors liked what he said, implying that the three anticipated quarter-point rate increases, which could start in March, would likely be enough to quell inflation (along with a hoped-for return to normal supply conditions).

So far, 2022 is playing out as expected. But of course, this is only the eighth trading day of the year.

In late December, prior to the holiday, we published the January edition of the Cabot Turnaround Letter. Our first article, “Top Five Stocks for 2022,” we highlighted Credit Suisse (CS), Dril-Quip (DRQ), Lamb Weston Holdings (LW), Nokia (NOK) and TreeHouse Foods (THS).

In the past 30 days, four analysts have boosted their EPS estimates for our first pick, a consumer products company that has a current annual dividend yield of 2.08%, paid quarterly. Our second recommendation is some hefty profit-taking on a previous idea.

I was recently able to speak to Laurie Sims, President at Libsyn. We had a nice conversation, and I got some good insights into the business. See my notes at the end of this update.

This investment company is expected to grow earnings at a rate of 16.7% this year. The shares have a current dividend yield of 5.65%, paid monthly.

In a recent note, analysts at RBC noted that their buy rating for this energy company was based partly on its excellent earnings per share, which were “the best since the 1Q20 print, and more than double the 59 cents reported in the year-ago quarter”, as well as it’s “reliable dividend.” The shares have a current annual dividend yield of just 8.6%, paid quarterly.

Gold broke decisively above the widely watched $1,800 level on Friday on a weaker dollar and rising geopolitical worries involving the situation in Afghanistan. As of late Friday, gold was headed for its best weekly close in almost two months.

This payments company is expected to grow its EPS by 53.76% annually over the next five years.

This logistics company beat Wall Street’s estimates by $0.63 last quarter, and 12 analysts have recently boosted their EPS projections for the company.

This industrial company beat analysts’ EPS estimates by $0.22 last quarter.

Greystone Logistics (GLGI) filed its 10-K recently, and I was surprised that sales declined in the 4th quarter by 5%.

I recently downgraded Donnelley Financial (DFIN) to Hold as I had concerns that the company was overearning given buoyant capital market activities which tend to be cyclical.

The top five holdings in this fund are Tesla Inc (TSLA, 11.96% of assets); Honeywell International Inc (HON, 7.71%); Danaher Corp (DHR, 5.14%); Eaton Corp PLC (ETN, 4.44%); and 3M Co (MMM, 4.34%).

This Latin American McDonald’s franchisee is forecasted to grow earnings by 101.5% this year.

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.