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It’s been a mixed week, with some good and some bad. On the positive side, many leading stocks have generally bounced in recent days, including a few that tested key support.

This was the third straight week of tedious action for many leading stocks and general rotation into other areas of the market. Reflecting that, the S&P 500 is up about 1% on the week, while the Nasdaq is basically flat.

As a result, this week I’m adding a diversified natural resources company based in Vancouver, British Columbia, Teck Resources (TECK), though because of the recent market weakness, I’m structuring our trade defensively.

Last Friday was the expiration of our December covered call positions, and I’m happy to report it was yet another great month. Here were our final profits and yields:

WHAT TO DO NOW: Hold some cash and take things on a stock-by-stock basis. The market is getting whacked today as inflation remains higher than expected, which has interest rates rallying sharply and expectations of Fed rate cuts sliding. That said, the trends of most indexes and stocks are still fine, and with 30% in cash coming into today, we’re not overreacting—but we will sell one-third of our Arista Networks (ANET) position, which is one of many tech names getting whacked after a good-not-great quarterly report, while placing PulteGroup (PHM) on Hold. That will leave us with around 33% in cash, which we’ll hang on to as we see how this pullback plays out.

The superb rally that began after October is fading.

November was the best month for the S&P 500 in over a year. But now some reality is starting to set in. Wall Street took the good news about peak interest rates to another level and started pricing in Fed rate cuts early next year. The market is pulling back after the Fed dismissed that notion.

Stop-losses, or more fully, stop-loss orders, are trading orders that are placed to execute a sale automatically if a stock falls below a specified trigger price. The idea is that these orders can prevent a small loss from becoming a large loss. It can also be used to lock in profits.

The market put on a constructive show last week, though today was a bit sloppy, as the surprise OPEC supply cut hiked oil prices brought some rotation ... and provided a reminder we’re still in a very news-driven environment. All in all the story remains mostly the same: There are positives, especially among growth titles, but the market is bifurcated and tricky, with a lot of stocks still in the doghouse. At this point we think playing things mostly halfway (good amount of cash, some nibbling on strong names) is still the best stance. We’ll leave our Market Monitor at a level 5 tonight.

This week’s list is a bit more mixed than in recent weeks, with less growth and more cyclical and cheap situations. Our Top Pick is an old friend in the cybersecurity space that has a few months of positive momentum as Wall Street anticipates big profit growth ahead.

New technology is driving huge demand growth in old technology. The growth of artificial intelligence, electric vehicles, and semiconductor manufacturing will generate huge growth in electricity.

After being stagnant for most of the last two decades, electricity demand is soaring. Most of the increasing electricity demand (from data centers, EVs, and chip manufacturing) is coming from climate-conscious technology companies that will likely try to secure carbon-friendly power sources whenever possible.

Companies that can provide low-carbon electricity generation should be the primary beneficiaries of this increasing electricity demand. Opportunity is being created for certain companies that also tend to be very recession-resistant at a time when the economy is slowing.

But there is one utility that stands above all others in terms of the current opportunity. And it is highlighted in this month’s issue.

Carl Delfeld, chief analyst of Cabot Explorer, covers clean energy including electric vehicles, semiconductors, strategic resources, and fintech.
Learn how to identify high growth power sectors and then the best power stocks.

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