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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.

Focusing on a sector can miss the real picture, which is why I dive deeper into the “themes” powering the best stocks, like these three undiscovered software stocks.

Spotting a “top” in in high-flying stocks is impossible but sticking to a system of taking partial profits on a very fast-moving stock is pretty darn easy, if you can manage your emotions.

Despite some under-the-surface concerns, it was another strong week for the market as the S&P 500 gained 1.5%, the Dow was mostly unchanged and the Nasdaq added 1%.

While the big-cap indexes were acting fine, we had been writing about an increasing number of yellow flags out there—it started with secondary measures like sentiment (which got buoyant in the weeks after the election), and early last week, we saw the first signs that some key leading stocks were coming under pressure. Indeed, we came into this week with our Market Monitor down to a level 6.

Small-cap stocks continue to act extremely well, and we have a new all-time high for the S&P 600 SmallCap Index. It hit 1,520 on an intra-day basis on Monday, then closed at 1,545. Both levels surpass the previous all-time high of 1,477 from November 2021.

The index is hanging tight to those levels today too, trading near 1,537.

First, a reminder that there will be no Top Ten issue next Monday—it’s one of our two weeks off all year—though we’ll send out a Movers & Shakers update next Friday. Being our last missive of 2024, we want to wish you and yours a very happy, healthy and prosperous New Year.

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As for the market, we’ve seen the Santa Claus rally kick in a bit in recent days—for the week as a whole, most every major index and growth measure is up by 1% to 2% on the week.

After falling 4-6% two weeks ago, the S&P 500 and Nasdaq bounced back by 2-3% last week. Quite the whipsaw! By week’s end the S&P 500 had gained 2%, the Dow had risen marginally, and the Nasdaq had added 3.3%.

Somewhat quietly, the Dow has rallied eight straight days, and is leading the market higher as of late. Such is the rotation of the market, especially during earnings season.

For the week the S&P 500 gained 1.4%, the Dow rallied 1.75% and the Nasdaq gained 1%.

We’ve seen plenty of split tapes in our day, but this one is about as divergent as we can remember, and this week was another example of it playing out. Coming into today, the big-cap Nasdaq was up about 3% on the week while the S&P 500 was up 1.5%—but outside of a couple of growth measures, the rest of the market was flat (up 0.5% to down), and that’s before what looks like a down opening this morning.

Before we get into this week’s idea we need to clean up a couple of positions from April expiration last Friday. This is what we are going to do …

Sell FROG Stock
Sell HOOD Stock
Sell IOT Stock

Stepping back, we are closing our FROG and IOT positions for losses, while HOOD will be closed at its max profit.

Despite some more worrisome price action throughout the week, the three leading indexes were able to eke out gains last week. For the week, the S&P 500 gained 0.5%, the Dow rallied 1.2% and the Nasdaq advanced by 0.2%.

For the second straight week growth stocks got hit hard, which weighed on the Nasdaq. Though interestingly, as money rotated out of the 2024 leaders, it raced into slow and steady stocks that have been left behind in years past. By week’s end the S&P 500 had lost 1%, the Dow had gained 1%, and the Nasdaq had fallen 3.5%.

Before we dive into this week’s covered call idea we need to address our stock positions coming out of April expiration, all of which we are going to sell as the market continues to be under pressure.

The S&P 500’s rally of 1.8% last Monday was quickly washed away as the bears once again sold into strength last week. By week’s end the S&P 500 had lost 1.5%, the Dow had declined by 1% and the Nasdaq had fallen by 2.6%.

It was yet another strong week for the market and countless stocks, many of which are breaking out to new highs. At some point the market may cool off, but for now at least, I’m not seeing any truly worrying signs. And in fact, the S&P 500 closed at a new record high as the index gained 1.44% on the week, while the Dow added 1.56%, and the Nasdaq rallied 1.63%.

The election results and Federal Reserve rate cut were seemingly just what the market was looking for as the S&P 500 rallied 4.7% last week, the Dow added 4.65% and the Nasdaq gained 5.4%.

As I noted last week, because of family travel this Monday’s update is focused on our open positions. Let’s dive in …

As I noted last week, because of family travel this Monday’s update is focused on our open positions. Let’s dive in …

Before we dive into this week’s covered call idea we need to move on from our Rocket (RKT) position following expiration last Friday as the call expired worthless, leaving us with our stock position.