Another day another beating of the bull tards … new December lows were seen in 75% of my possible candidates.
Here is the data at today’s close …
I created a new sheet to watch for/identify possible reversal candles on the 65min, 195min and daily time frames. Here it is …
The only possible reversal candle that my screens pop up today is BHGE on the 65min chart. No changes to my two holdings (VLO/APC) … maybe once we get the FOMC decision the market can bounce. If not, then maybe it gets nice and ugly into year-end and relief is only seen that last day or two before the end of the year.
Lots of hand wringing with the FAANG stocks and other tech market darlings. I continue to own AAPL Jan $160 calls and short AAPL Jan $160 puts as I expect AAPL to make a nice tradeable bottom. I added to both my positions today and I am full-up with the calls but will add to my short put positions into year-end if we can get more weakness next week. Here are my charts …
AAPL – 195 Minute Chart
I still think we have already or are in the process of making a final 3rd-wave low in AAPL. I doubt we make higher highs, and I think that the SLOT resistance will stop any bounce over the next couple of months.
I see lots of positive divergence in price momentum (panel #2), MA Spread (panel #3), DI+ (panel #4) and weakness in the trend strength histogram (panel #5).
AAPL – 30 Minute Chart
To me, the $163.33 low in AAPL was made with an unclear wave structure … that is why I am not definitive in my conclusion that a 3rd wave low has already been made. It could have been, but I do not see confirmation via an obvious completed wave count.
I extended the last bounce off of that $163.33 down to a new minor low … the 1.272x extension target shows us a possible price of $160.95.
It looks to me like AAPL has just completed a 3-wave price pattern into support.
AAPL – 65 Minute Chart #1
As you can see from the above chart, the 3-waves look pretty obvious. What is also obvious is that AAPL is not likely to hit their prior all-time highs any time soon. SLOT resistance is in the $198 – $219 area and the Point of Control since the correction off of the all-time high is $220.30.
AAPL – 65 Minute Chart #2
Since the quarterly earnings report/announcement of no longer providing iPhone sales figures, the Point of Control level generated during the stock selling is $179.04.
Bottom Line – lots of charts look like we have made some type of tradeable low … AAPL is another leading stock that looks like it should bounce here for a couple of weeks at least.
I wrote a blog post about Downtown Josh Brown’s bullish call on JPM back on November 2, 2018 (click here). Bottom line is that he proclaimed JPM as one of his favorite stock pick/set-ups … I thought it was just bouncing into resistance.
Here is the chart from that post …
JPM – 65 Minute Chart (November 2, 2018)
Here is the current chart …
JPM – 65 Minute Chart
The 61.8% SLOT level was once again a very important resistance. You can see that we are pretty close to the C-wave 1.272x extension target. When I look at the C-wave up close, I do not see a nice normal wave structure, so I am a bit hesitant to call the end to the bigger C-wave move here. The move lower might be done here but maybe we need one last new minor low to complete – we’ll see.
Banks as a sector have shown all sorts of problems the past while in comparison to the overall market. I think JPM and the rest of the banking industry will continue to be laggards as a slowing in the economy gets baked into the stock market.
Although today’s price action was not what market bulls would have wanted considering how we gapped higher and then trended lower for most of the day, the price wave created by today’s action still keeps possible the read I talked about in yesterday’s road map (click here for that post).
S&P 500 Index Futures Contract (ES) – 30 Minute Chart
Once we see that we are bouncing higher out of a new minor low tomorrow sometime (probably in the morning, then we can watch to see if resistance around that 2726 level (61.8% resistance) will hold and whether or not my read of the bigger price pattern is accurate.
Bottom Line – while not ideal, the price action in the ES today still keeps in play a bigger bounce out of yesterday’s low.
Tax loss candidates sorted by the bounce off of their December lows – highest to smallest. I added a couple of new columns to the right. They are labeled “30mATR” “65mATR” and “195mATR”. Those columns paint a green check mark when the ATR position for that time frame is in a position of support.
Obviously when these stocks make a bottom after the tax selling is complete, they will flip the ATRs to support on their bounce higher. These columns just help me keep track of which stocks are beginning to move.
I’m going to just pin this daily update to the front of my blog so I don’t have to tweet out each day’s update. Here is a running summary of the number of lows hit on each day this month.
Updates (Dec 14th) … the market pushed lower today on growth fears. I will update my road maps this weekend, but as you can see on the chart below, new lows in my list tax loss candidates expanded today – 28 or 62.2% of my list made new December lows today taking out the prior max low date of December 10th. I am expecting to find a couple of more tax loss trades before year-end, so the next two weeks should hopefully give us a capitulation whoosh …. maybe the FOMC announcement on Wednesday December 19th will mark the absolute low for many stocks.
If you look at the chart at the top of the blog post, you will note that only NOC has made it above its Nov 30th closing value. Eight stocks are showing positive relative strength vs the S&P 500, and 11 stocks outperformed the S&P 500 index this past week – four of those 11 were from the energy sector so I am still holding out hope for my VLO and APC tax trades (both of those outperformed the SPX this past week).
Updates (Dec 13th) … the market was flat today, but now all of my tax loss candidates are up off of their December lows. No changes to my tax-loss holdings in VLO or APC.
Updates (Dec 12th) … I started a position in a possible tax-loss selling candidate today. I purchased March monthly $70 call options in VLO at $7.48. I chose the March month because I am also trading VLO as an overall valuation play going into 2019.
I also bought a starting position in APC … here I am just playing a tax-loss bounce in APC and energy stocks in general. I bought the Jan $55 calls for $2.10 today. I have about a 1/3 position and I want to buy on any consolidation/small pullbacks over the rest of this week.
Updates (Dec 11th) … just looking at the first couple of names on this list (NOC, ATVI, and EA are interesting charts to me, and possibly the first candidates to buy using options. I’ll monitor and update the blog going forward.
So where is the market heading? Some people think it is headed lower, some think it has to rip higher into the Xmas rally. I have a bias that we are not finished the corrective pattern off of the all-time highs, but the exact day-to-day correction will unfold however it plans to unfold. I just watch the wave action and react as they are painted on my charts. Here are the current charts …
S&P 500 Futures Contract (ES) – 30 Minute Chart
The S&P 500 Index futures contract (ES) looks like it made a 3-wave move down right into the lower support level on my broadening price pattern. That could mean that this portion of the bigger current wave structure down is complete.
If the ES contract has made a low, it would make sense that the NASDQ has also made a low or is close to making a low … the above 240 min chart could be bottoming right in this 1.382x timing window.
If I am right about a bigger more complex corrective pattern, then possibly we go up with the S&P 500 into resistance before pushing lower into a final bigger Wave-C low. If that is the future path for price, then the ES is likely to carve out the following pattern.
S&P 500 Futures Contract (ES) – 240 Minute Chart
Both of these C-wave support levels could be reached right around the end of 2018.
McClellan Summation Index – 65 Minute Chart
The McClellan Summation Index has flipped bearish and needs to get back above the 20EMA and the ATR resistance levels to flip the market underpinnings back to the bullish side of the ledger.
Bottom Line … maybe we are going to bounce from here. I posted some FANG charts on Stock Twits and Twitter earlier today and you could argue that the charts look more likely to bounce than they do to continue collapsing. Any bounce happens from the smaller time frame before they expand to the bigger time frames – its pretty simple to watch for that bounce therefore.
Lots of selling in all stocks so far this month … as I have done in previous years, I monitor a list of about 45-50 stocks for possible candidates to trade into early January. Typically this would mean buying call options and/or stock in the last two weeks of the year from a list of candidates that are possibly in the midst of selling by investors who are liquidating their big 2018 losers for tax-purposes.
As mentioned in previous blog posts on this topic, I screen for stocks at the end of November each year (or the first Friday of December if that means Dec 1-4th) that have a large 2018 price range (minimum of 25%) of the stock’s closing price and the closing price for my analysis is in the bottom 10% of that YTD price range. This year I decided to use the S&P 500 as my scanning universe.
I monitor these tax loss candidates on a variety of ways, but the end goal is to try and find stocks that are clear “victims” of unrelenting tax-loss selling and therefore are likely candidates to pop once the 2018 selling is complete – that can mean a pop on the last few days of the month and typically the first couple of weeks in January. My preference is to use January monthly call options so I know my exact risk for each trade.
Anyways, I will try to keep traders abreast of what I am seeing and planning to trade again this year. Below are a list of PDFs taken of my tax-loss watch list sorted a variety of ways – I will update them every weekend until the end of January 2019.
Here is a summary of what sectors are dominating my 2018 tax loss list …
You can see that this year, the sector most found in my list is the energy sector. I like when a sector is well represented as that could mean that all stocks in that sector are getting liquidated and that the reasons behind the weakness are less related to company-specific issues.
Here is my watch list sorted by the last week’s stock performance …
Anyways I’ll put my PDFs as at December 7, 2018 here for any interested traders (you will need to zoom in on the sheet to see all of the detail). All I need to do now is to constantly reviewing the daily charts for these stocks to see when and if any good trade candidates appear over the next couple of weeks.