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%.

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%.

While every situation is different, a pretty good rule of thumb for investors is to look for stocks of well-run companies with solid fundamentals in a sector that has been out of favor. Then check that the stock is in an uptrend with clear catalysts that support a further rise in its stock price.

Today, we add a stock that checks all those boxes.

In the January issue of Cabot Early Opportunities, we take a look at updates within our portfolio then dive into five stocks from markets ranging from defense to cybersecurity to the blooming IT infrastructure market.

As always, there’s something for everybody!

The three leading indexes again made a run at new highs last week as the S&P 500 gained 1.75%, the Dow rallied 0.7% and the Nasdaq added 2.88%.

After a sour first week of the year, leading stocks snapped back very nicely last week, and when you add in the other encouraging intermediate-term vibes (trends of the indexes and most sectors are up), we remain bullish overall. That said, we’re also keeping our feet on the ground: The current advance is now about two and a half months old, earnings season is here and the broad market was a notable laggard last week, all of which means further volatility and crosscurrents are possible, even likely. We’ll leave our Market Monitor at a level 7.

This week’s list is another where’s there’s something for everyone. Our Top Pick is one of many medical-related stocks that’s showing strength thanks to a new product, great Q4 guidance and expectations of accelerating growth this year.

The market is in a holding pattern, but holding patterns aren’t bad things when they come on the heels of the kind of run-up we saw in November and the first three weeks of December. Besides, many of the stocks in our Stock of the Week portfolio aren’t in a holding pattern, with 10 of them (!) trading at either 52-week or all-time highs. So today, we add another high-upside position that should benefit from another banner year for the travel industry. Mike Cintolo recently recommended the stock to his Cabot Top Ten Trader audience.

We are just weeks into a year that has so far been better and different than last year.

The S&P 500 is up 4.7% in January after falling 19.4% in 2022. The winners and losers are also different. The best performing sectors are last year’s worst performing, technology and consumer staples. The worst performing sectors are last year’s best performers (with the exception of energy): healthcare, utilities and consumer staples.

Is this a portent of things to come or just a temporary reallocation?

The S&P 500 is off to an excellent start in 2023 and according to Ryan Detrick of Carson, that bodes well for the rest of the year. I’m continuing to see many opportunities in the micro-cap world. The two areas that seem the most interesting to me right now are the biotech and energy sectors.

Only three months ago, the financial community, including investors, analysts, economists, commentators and others, despaired that the Fed’s rate tightening program would produce a hard landing. The resulting combination, of higher interest rates and slowing/negative earnings and economic growth, is toxic for stock markets. Not surprisingly, the S&P 500 tumbled 27% from its highs to touch 3,500 in mid-October.



With the turn of the calendar and minimal discouraging economic news, the same financial community is now optimistic that we’re headed for a soft landing, or possibly no landing at all (economic growth remains positive). Worries that the Fed will inexorably keep raising interest rates have been replaced with the view that perhaps only 25 or 50 basis points of further increases are ahead. The outlook previously labeled as “toxic” has been transformed into “supportive” for equities. In the three short weeks since year’s end, the S&P has lifted 5%.

With today’s note, we offer more clarity on last week’s earnings report from Wells Fargo & Company (WFC) and provide updates on several recommended stocks.

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

WHAT TO DO NOW: Remain cautious but keep your eyes open. The evidence as a whole remains mostly negative, with the long-term trend down, the intermediate-term trend sideways and most stocks struggling to hold breakouts. But we are seeing legitimate strength in the broad market (our Two-Second Indicator remains bullish), which is a clear positive. We’re not going to rush things—we’re still holding around three-quarters in cash—but should the market firm up there could be a lot of opportunities. We have no changes tonight.

The S&P 600 Small Cap Index hit a 2022 closing low of 1,064 on September 26. On November 11 it moved back above its 200-day moving average line and closed at 1,232. That was a 16% move off the low.

The index then moved sideways for a few weeks before dropping back below both its 50- and 200-day moving average lines in mid-December. At that point, the index found support at 1,135, roughly 7% above the November lows.

A key theme of the Explorer is that there is always a bull market somewhere in the world. Today we offer a quick update on two – nuclear energy and electric vehicles.

All in all, the track record of nuclear energy is very good, especially when compared with the effects from comparable forms of energy.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

2023 is off to a good start! So far in January, the S&P 500 is up 4.2% and many of our micro-cap recommendations are also starting the year off on the right foot. We will see if the positive momentum can continue to close out the month. Earnings season is officially beginning for large-cap stocks.

Earnings season is here again. It’s that time of the quarter that has so often buoyed and reinvigorated the market. But this one is unusual because average earnings are expected to shrink.

Earnings boomed after the pandemic. But now there are much tougher year-over-year comparisons and a slowing economy. The average earnings for S&P 500 companies are expected to decline 3.9% from last year’s fourth quarter.

Montauk Renewables (MNTK) has closed below our sell-stop of “around 16.50” two consecutive days, and we’re recommending selling the position today.

The market has a solid start to the week, and there were some intriguing breadth measures during the pop. But our market timing indicators are still clearly negative, and more important, we’re actually seeing growth stocks either not participate much on the upside—or start to crack on today’s selling. This bulletin concerns Enphase (ENPH), which has been a port in the storm but is decisively breaking down today; we’re cutting bait here and holding the cash.

We still have an IWM iron condor open for the October 21, 2022 expiration cycle that currently stands in profitable territory, but given that we are only 45 days away from the November 18, 2022 expiration cycle I want to begin the process of selling more premium.

Today, given the extreme oversold readings we are coming off of from last week, I’m going to open a position in the S&P 500 ETF (SPY), more specifically a bull put spread. I’m giving myself over a 10% margin of error on the trade. I also intend on adding several more positions for the November expiration cycle over the coming days.

The market’s meltdown continues, with the buyers completely on the sideline as just about every stock and sector cracks. The Model Portfolio is already in a highly defensive stance (72% cash coming into today), so we’re not craving more cash, but we’re also not simply going to hold onto things as they melt away.

As part of the Income Wheel approach, we allowed our Coca-Cola (KO) puts to expire in-the-money at expiration last week. As a result, we were issued shares at our chosen put strike of 60.

With the market pulling back again today, our IWM iron condor is nearing our short put strike of 163. We’ve had a good start, with the Quant Trader service outperforming the market by a significant margin.

With the market continuing to have indigestion following the Fed’s 75bps rate hike and higher-for-longer messaging (regarding interest rates), we’re going to trim our position in Toast (TOST) today to reduce the risk of things getting away from us.

Before I get to our PFE trade, I wanted to let everyone know that, per our income cycle guidelines, we will allow our KO puts and WFC puts to expire today (unless we see a rally today). This means that on Monday we will be put shares of both stocks and begin the process of selling calls on both.

Like in our last alert for the All-Weather portfolio, we need to keep our deltas at reasonable levels, and with the recent pullback, we are a bit longer than we would like to be at the moment. Much of the premium has been taken out of our October expiration positions and with 29 days left in the October cycle, we still have plenty of time to add to our premium totals in October by selling more premium today.

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.

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 Momentum 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 Momentum Trader features.