We made our second straight successful trade for this earnings cycle last week. We were thankful to take quick profits in Visa (V) Friday morning. All went well as V opened well within the chosen range of our iron condor and, as a result, we were able to take off the trade for a nice one-day gain of 9.9%. But remember, even though these are short-term trades, this is a long-term strategy – a strategy based on the law of large numbers and statistical probabilities.

Ahead of a potential monster week for the market, with plenty of volatility, last week was fairly quiet for the indexes. The S&P 500 gained 0.7%, and the Dow and Nasdaq were mostly unchanged.

Ahead of a potential monster week for the market, with plenty of volatility, last week was fairly quiet for the indexes. The S&P 500 gained 0.7%, and the Dow and Nasdaq were mostly unchanged.

Big picture, it’s hard to find much wrong with the market, as the primary evidence (trends of the indexes, action of leading stocks) remains clearly positive. Thus, we’re generally holding our winners and think there’s a good chance last November marked a major turning point after nearly three years of growth stock sluggishness.

That said, near-term, we’re keeping our feet on the ground and going slow on the buy side, as there’s no question stocks have had a good run and many leaders are extended. Recently, we’ve trimmed a couple of positions but, tonight, we’re averaging up on one name to fill out our stake.

Despite some weakness early in the week, the indexes bounced back in a big way, closing at new all-time highs. For the week, the S&P 500 gained 1%, the Dow added 1.07%, and the Nasdaq soared higher by 2%.

I believe the good news will prevail in 2024. But you never know. Forget about trying to predict the direction of the overall market. However, certain aspects of the current environment and established trends are much more bankable.

For example, it is highly likely that interest rates have peaked. Sure, rates could bounce higher than they are now. But that 5% peak level on the 10-year Treasury is unlikely to be eclipsed, at least in this cycle. Artificial intelligence is here to stay. Businesses must spend on it not only for competitive advantage but as a matter of survival. The new technology will continue to be a strong growth catalyst for technology stocks.

In this issue, I highlight a fantastic dividend stock whose long record of strong performance has been interrupted these last two years because of rising interest rates. It’s also a company that focuses on technology and will surely benefit from the proliferation of AI in the years ahead. The timing for this stock should be outstanding.

The vast majority of our work is based on the trends of the major indexes and the action of leading stocks, and on those two fronts, things look very good; we’ve even seen the broad market perk up after a tough stretch, too, which helps the cause. About the only thing to worry about here is that ... there’s not much to worry about, and that many leading stocks are showing some near-term exhaustion patterns. Big picture, we’re moving our Market Monitor back to a level 8, but you should still keep your feet on the ground, looking for decent entry points in strong stocks.

This week’s list has a lot of stocks that not only have excellent overall charts but have either consolidated calmly for the past few weeks—or have shown outstanding buying volume in recent days. Our Top Pick is one of the latter, gapping up to new highs last week on earnings.

After a sluggish start to the year, stocks have broken to new highs, with not even diminished expectations of Fed rate cuts able to slow them. Is it the next leg up in this still-nascent bull market? Perhaps. But in case there’s some earnings season turbulence ahead, today we add a low-risk value stock that’s been a favorite of Cabot Value Investor Chief Analyst Bruce Kaser for quite some time.

Details inside.

We locked in three more profitable trades at expiration last Friday, bringing our total positive trades total for the January 19, 2024 expiration cycle to five. Our total returns so far in January are 10.86% with the potential for a return in PFE that would certainly add a few percentage points to our overall returns for the month.

As stated above, we have one position, PFE, that is due to expire this week. As it stands, our position is currently sitting at-the-money, but it doesn’t really matter where it closes at expiration this Friday as we will continue to follow the guidelines for our income wheel strategy.

As we discussed on our subscriber-only call last week, this begins a four- to five-week period of major earnings announcements. More importantly, this week offers us several potential opportunities to trade a few earnings announcements.

Per our discussion last Friday, Visa (V), IBM (IBM) and American Express (AXP) offer the best opportunities with United Rentals (URI) not far behind. Surprisingly, Microsoft (MSFT) and Texas Instruments (TXN) didn’t offer any decent opportunities, or at least that was the case when we took a look Friday. But who knows, maybe implied volatility will kick up a bit higher before earnings and offer some better opportunities to sell premium.

We added an iron condor last week and hope to add a few more trades this week, including a bear call spread and a bull put spread. I’ll be focusing on sector ETFs and individual stocks as the major indices continue to see low levels of volatility.

We’ve seen an incredible rally since October 27, 2023. SPY was trading for roughly 411 at the time and at the close of the January 19, 2024, expiration cycle the market-leading ETF was trading for 482.43.

Despite some weakness early in the week, the indexes bounced back in a big way, closing at new all-time highs. For the week the S&P 500 gained 1%, the Dow added 1.07%, and the Nasdaq soared higher by 2%.

We were rolling along in a choppy market to nowhere as the sticky inflation/hawkish Fed conundrum promised to play out for longer than hoped at the beginning of the year. But over the past several days a Black Swan event popped up, the failure of Silicon Valley Bank.

This week, we comment on earnings from ESAB (ESAB), Duluth Holdings (DLTH) and preliminary results from Volkswagen AG (VWAGY). Next week, Volkswagen reports its full results – we’ll include more comments as needed. That should wrap up this earnings season. Walgreens Boots Alliance (WBA) is an off-cycle company and reports on March 28.

The big events so far this week have been Fed Chair Jerome Powell’s testimony before the Senate Banking Committee (Tuesday) and the House Financial Services panel (Wednesday). He sounded more hawkish than he did during his February 1 press conference.

Here are the latest developments in the cannabis sector over the past two weeks.

The bottom line: States continue to march forward with legalization, but the negative trends of price compression and higher financing costs weigh on weaker players. That will create acquisition opportunities for the stronger companies in the space.

The market had a great start to the year and then slumped in February. March started off with the best week in a month for the S&P 500. What’s next?

There will be a lot of information coming out this month that could determine whether the market rallies or slumps from here. This week, the Fed speaks and the February jobs report comes out. These events could give investors a better idea of how aggressive the Fed will remain.

This week, we comment on earnings from Bayer AG (BAYRY), Berkshire Hathaway (BRK/B), Dril-Quip (DRQ), Holcim (HCMLY), Kohl’s Corporation (KSS), Macy’s (M), Six Flags Entertainment (SIX), Viatris (VTRS), Volkswagen AG (VWAGY) and ZimVie Holdings (ZIMV).


Next week, we provide an update on earnings from ESAB (ESAB) and Duluth Holdings (DLTH), which should wrap up this earnings season.

WHAT TO DO NOW: The market remains in a pullback, with interest rate fears causing the indexes to slowly deflate. To this point, most indicators are still positive, though they’re leaning on the fence—yet there are many stocks and sectors that look ready to get going if the bulls can show up. All in all, we think how the Model Portfolio is situated (38% cash) makes sense here, though given the slippage, we will place ProShares S&P Fund (SSO) and Wingstop (WING) on Hold tonight. Details below.

Yesterday was Tesla’s annual investor day and it seems it came up a bit short regarding specifics.

Elon Musk started with a big number even by Washington standards, suggesting that realizing the vision for an energy transition could require some $7 trillion of investments in electric-vehicle manufacturing.

January was up. February was down. What’s next?


The S&P 500 rallied 6.2% in the first month of the year but pulled back 2.3% in February (as of Monday’s close). The market is still in positive territory YTD. But that could change.

As expected, the second half of February was pretty weak from a stock market return perspective.But February is over and March and April tend to be seasonally strong, according to Ryan Detrick of Carson Investment Research.

A few weeks ago, we introduced the Gartner Hype Cycle, which traces the path that all tech companies follow in what essentially is an immutable law of tech investing. Currently, tech stocks have passed the Peak of Inflated Expectations and are sliding down to the Trough of Disillusionment. A few will ascend back to prosperity along the “Slope of Enlightenment” if they maintain both their relevance and their competitive edge. But most will lose one or both of these traits and thus continue downward in what could be labeled the “Decline into Oblivion.”

The chart below follows the same pattern as the Tech Hype Cycle chart while it more specifically traces the pattern of revenues and profits. The peak of the Hype Cycle corresponds, of course, to the peak of the Sales cycle in the Maturity Stage. Most tech companies follow the Decline Stage line into oblivion.

Last week marked the fourth straight week of declines for the S&P 500 and was the worst week so far this year, down nearly 3%.

The problem is inflation, go figure. The Federal Reserve’s preferred measure of inflation, the Personal Expenditures Price Index (PCE), was much higher than expected in January and showed inflation moving higher, not lower, to start the year.

Cannabis stocks are screaming higher this morning. Our AdvisorShares Pure US Cannabis (MSOS) ETF is up over 8%. Three of our portfolio names are up even more, 9% to 15%.

The Fed-induced rally yesterday has left a few of our positions with deltas that are shorter than we prefer. As a result, I want to buy back our short calls in those positions and sell more premium going out to a higher strike and further out in duration.

Okay, it’s time to ramp things back up again. I want to sell premium for the January expiration cycle and I’m going to start with a bear call spread and hopefully, over the next few trading days, add an iron condor and bull put spread in a few other of the major index ETFs.

The Fed-induced rally yesterday has left a few of our positions with deltas that are shorter than we prefer. As a result, I want to buy back our short calls in those positions and sell more premium going out to a higher strike and further out in duration.

We got into CrowdStrike (CRWD) back in 2019 almost near the stock’s lowest publicly traded price (below 50).

As part of the Income Wheel approach, we allowed our GDX calls to expire in the money at expiration last week. As a result, our shares were “called” away at the price of 26, and we locked in 3.87% on the trade.

With 18 days left until expiration and our IWM iron condor worth $0.24, I want to go ahead and lock in some nice profits. We sold the iron condor for $0.75 just 13 days ago and are now able to lock in over 10% on the trade. If you choose to hold on to the trade, please be aware of the risks.

We want to bring the delta of our position back to “normal” state. In our terms “normal” means a delta between roughly 0.40 and 0.60. As it stands, with TLT rallying as of late, our deltas are near parity.

Moving Shell plc (SHEL) from Buy to Sell

We currently own the IEF January 19, 2024, 85 call LEAPS contract at $19.00. You must own LEAPS in order to use this strategy.

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.

Our BITO 13.5 calls for the November 25, 2022, expiration cycle are essentially worthless. As a result, I want to buy back our BITO calls, lock in our premium and immediately sell more premium.

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.