As we move into the last few weeks leading up to the next earnings season, it should be no surprise that there is little in the way of earnings announcements this week, or next week for that matter.


Earnings season “officially” begins in just over two weeks. On April 12, several of the big banks (WFC, JPM, C) are due to kick things off. As always, we will look to take on a few trades around that time. Until then, we patiently wait, sitting on our hands, for the earnings calendar to provide us with ample opportunities.

The goal is simple this week. We have two open bear call spread positions at the moment which means our portfolio currently leans to the short side of things. This week, if the market cooperates, I plan to add some long exposure through a debit spread, or a bull put spread, to even out our deltas so our portfolio takes a more neutral stance. There is no doubt that the air is getting thin at these levels. But, as we have seen recently, just when you think the market might take a turn, the bulls make an appearance.

It was a strong week for the market following the Federal Reserve meeting. And while some talking heads may say the reason the indexes rallied was the Fed’s moves, or lack thereof, more likely the reason is we are in a bull market.

It was a strong week for the market following the Federal Reserve meeting. And while some talking heads may say the reason the indexes rallied was the Fed’s moves, or lack thereof, more likely the reason is we are in a bull market.

It was another slippery week for the market as the sector rotation and trader narratives seemed to swing violently day-to-day. By week’s end the S&P 500 and Dow were marginally lower, while the Nasdaq fell 0.76%.

It was another slippery week for the market as the sector rotation and trader narratives seemed to swing violently day-to-day. By week’s end the S&P 500 and Dow were marginally lower, while the Nasdaq fell 0.76%.

Most growth leaders and even the Nasdaq itself has been churning since early February, with a lot of ups and downs but not much price progress—but this week has been more encouraging, as the selling pressures have been unable to persist and the major uptrend may be reasserting itself (basically the opposite situation that was seen repeatedly in 2022-2023). That doesn’t mean it’ll be smooth sailing from here, so we’re still being discerning on the buy side, but we’re holding our winners and remaining in an overall optimistic stance.

In the Model Portfolio, we cut bait on one half position earlier this week that was heading in the wrong direction, but we’re holding our strong performers and tonight are putting a chunk of money to work.

In the March Issue of Cabot Early Opportunities we spread things around with a diverse group of mid-caps, plus one large cap from our Watch List that’s one of the biggest stories in MedTech.

As always, there’s something for everybody.

Enjoy!

Before we get into this week’s covered call idea, we have two positions we need to address coming out of expiration Friday.

Because the market has somewhat lost its momentum recently, we are going to exit our WDC and WSC stock positions, as the March calls we sold expired worthless on Friday.

The intermediate-term trend of most major indexes and most leading stocks is still pointed up, but there’s no doubt we’re seeing much more choppy action, with most leading stocks basically marking time since early February. The good news is that, while we are seeing some sluggishness and a larger number of potholes, there are some areas of the market that are perking up—retail names started to pop three or four weeks ago, and more recently we’ve seen some commodity areas begin to flex their muscles. As we said last Friday, then, it’s not so much that there are major red flags out there, but more that the very bright green light has dimmed some as money starts to slosh around and some uncertainties (like interest rates and the Fed) pop up. We’ll again leave our Market Monitor at a level 7.

This week’s list is heavy in commodities and newer retail names, and our Top Pick looks like it’s leading what could be a group move.

After a rare down week for the market, and with the Fed set to potentially pour their usual pitcher of cold water on investor enthusiasm again this week, it’s possible an extended pause or even a modest pullback in stocks is in order. With that in mind, today we add another safety play in the form of a high-yield business development company Tom Hutchinson recently recommended to his Cabot Dividend Investor readers. And it’s not some stodgy, slow-burn title – the stock is trading at 52-week highs!

We are finally through March expiration and volatility continues to remain at low levels. Volatility is starting to perk up a little, but the VIX still sits below 15, at 14.41. Until we see a sustained push towards the 18 handle, we should expect to see market complacency rule the day. A return to more normal levels of volatility (18 to 22) would allow us to expand our positions. Until then, we patiently wait for Mr. Market, and more importantly, probabilities, to lead the way.

The market was looking pretty good through last week. Then this week, with no meaningful progress on the debt ceiling, momentum has deteriorated.


Yesterday afternoon U.S. House Speaker McCarthy was on a roll, saying that things are going a little better, that he won’t put a bill on the floor that spends more than last year and that the President is realizing he has to spend less.



JPMorgan says they put the odds of no debt ceiling deal by early June at around 25% and rising.

The Explorer had a good week with Butterfly (BFLY) up 15% and Solid Power (SLDP) up 10% this week. The S&P 500 has risen 8% in 2023 but the market gains are very narrow and concentrated, with the top five stocks accounting for most of the gains.

The market is near the highest level since last summer and up over 9% YTD. But it hasn’t made a sustained up or down move since the beginning of April.

It’s been more sideways action for most of the last week. The big obsession now is with the debt limit. No agreement has been reached and the crucial, as laid out by Treasury Secretary Janet Yellen, June 1 deadline is fast approaching. The market can’t seem to move higher until the issue is resolved. But it doesn’t really fall because investors expect the usual last-minute deal.

This week, I wanted to share a couple good charts to show why I continue to be bullish on energy stocks.

First, energy still represents a very small weight in the S&P 500.

Energy as a percentage of the S&P 500 reached as high as 16% in 2009. Today it’s under 5%.

The S&P 500 continues to grind higher, now posting a year-to-date gain of 10%. Investors are collectively buying the current narrative that supports these gains: The Fed is poised to cut interest rates later this year to avoid an almost-certain recession.

This week’s note includes our comments on earnings from Vodafone (VOD). Next week, Kohl’s (KSS) reports, with Macy’s (M) and Duluth Holdings (DLTH) reporting on June 1.

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No banks imploded this week, and there are rumors that the folks in Washington are making progress on a debt deal. Plus, we think the Fed may just pause for a bit, if not be done hiking rates.

Add it all up and the broad market is inching higher.

So far, the small-cap index is being left behind. That’s because of the high weight of financials and energy, and those two sectors look terrible in small-cap land.

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Although the market is up over 7% this year, it has been moving sideways for the last six weeks. It can’t seem to decide whether it will go higher or lower. But it will have to choose eventually, and probably soon.


The resilience has been impressive. Despite a plethora of troubling issues and headlines, stocks have been hanging tough near this year’s high. While anything can happen, the next significant move is more likely to be lower than higher at this point.

These days everyone is talking about the U.S. Debt Ceiling and whether it will be raised again.

The U.S. debt ceiling currently stands at $31.4 trillion, and if it isn’t raised, the U.S. could default on its obligations.

U.S. Treasury Secretary Janet Yellen said in January the government could pay its bills through early June without increasing the debt limit.

Goldman Sachs estimates that the Treasury could announce an early June debt limit if tax receipts are down 35%. If tax receipts aren’t down quite as much, the deadline could push out into July.

I will be exiting the Disney (DIS) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET tomorrow, February 10.

As discussed in our weekly issue this week, and on our weekly call last Friday, I will be taking a position in Disney (DIS) today. DIS is due to announce earnings after the closing bell today (February 8). The stock is currently trading for 111.10.

With February 17 right around the corner and several of our positions with little to no premium left, I want to start the process of buying back our short calls and immediately selling more premium.

Inspire Medical (INSP) delivered yet another better-than-expected quarter after the closing bell yesterday as Q4 results came in near the high end of management’s pre-announced range.

Pinterest (PINS) reported Q4 results after the bell yesterday that were lighter than expected but don’t change the story of a company streamlining operations and tweaking the platform to drive modest user growth and, as a result, higher advertising revenue. Pinterest is also growing internationally.

I don’t love the action in Procept (PRCT) this week. While the broad market has been acting well and a lot of “risk on” stocks have gone up, shares of PRCT have headed south.

Today we are moving shares of Dow (DOW) from Buy to Sell. As the shares have reached our 60 price target, and with no compelling reason to raise that target, we are moving the shares from Buy to Sell. This change will also be made in the Cabot Turnaround Letter.

Moving Kraft Heinz (KHC) to Sell

I will be exiting the Starbucks (SBUX) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET today, February 3.

The FOMC met this week, and the meeting wrapped up with a 25bps hike, as expected. A subtle hint of what was to come (easy to point out in hindsight) was that the FOMC’s statement removed the reference to inflation being elevated due to supply and demand imbalances relating to the pandemic.

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.