Bond ETF Update – March 5/19 …

My buddy Francisco mentioned to me today that bonds look like they are ready to move higher … that immediately made sense to me as I knew that bonds had broken out of the downward broadening price pattern at the end of 2018, and from all that I have recently been watching, US equities have run out of juice in the bounce from the late December lows.

I’m not going to put on any swing trades here in bonds yet, but when the bond ETF (TLT) gets back above the 195-min 20-ema and the 20-ema’s signal line (i.e., price gets back into a bullish position), I will just watch it a bit closer and probably look to trade it long intra-day or for a max of 2 or 3-days at a time. Here are the charts …

20-Year Plus US Treasuries Bond ETF (TLT) – Weekly Chart

Like I mentioned above, the TLT price broke out of its downward broadening price pattern in late-2018. Will that be a fake break-out? Maybe, but I think the strength shown by the Relative Strength indicator tells us to expect further strength in TLT in the weeks ahead.

20-Year Plus US Treasuries Bond ETF (TLT) – Daily Chart

So the pullback here in early 2019 has all the looks of a ABC sideways consolidation … price poked below the A-pivot low and therefore it technically has created a complete ABC price pattern. Is price finished with the C-Wave?

20-Year Plus US Treasuries Bond ETF (TLT) – 65 Minute Chart

The 65-min chart is not the best one to rely on for assessing then end to a weekly price pattern … however, all reversals have to begin somewhere. Price broke above the 65-min ATR resistance level today, so traders looking for evidence of the near-term top in equities should take heed.

Again, I think there is a good chance that bonds do well going forward here for the next several months … I do not believe that a new all-time high in bonds is in the offing, but I think that we can at least get a second leg higher out of the broadening price pattern.

So thanks again, Francisco for the heads-up … let’s see if we can make some money in bonds here over the next little while.

Cheers … Leaf_West

NASDQ 100 Road Map – Feb 6/19 …

Are we at resistance here? To me it looks like it …

NASDQ 100 Index Futures Contract (NQ) – 120 Minute Chart #1

It is pretty clear that the bounce off of the Dec lows is a 3-wave structure. From our price structure rules, what do we know about where wave 3’s terminate? They typically terminate at around the 1.272x extension target drawn off of wave 2 … that would make our target zone around 7016.50 for the NQ contract.

What about a time window? Typically wave 3’s will be equal to 50% -61.8% of the time taken to complete wave 2’s … that would make our window from 10pm last night up until 2am tonight.

The high made today in the NQ was made 9:34am and it was at 7038.75 … so we have made what looks like a complete 3 wave structure at around the typical price target in the time window that would normally occur – what about the actual look of the final 3rd wave? That typically will also form a smaller 3-wave price structure.

NASDQ 100 Index Futures Contract (NQ) – 120 Minute Chart #2

So it appears to me that price has completed a smaller 3-wave price structure in the final bigger wave 3 … there is nothing else that I would normally expect to see when looking for a logical place for resistance to hold.

NASDQ 100 Index Futures Contract (NQ) – 240 Minute Chart #1

The above chart is a 240-min chart … again, an obvious 3-wave structure can be seen pretty easily. Also, price has stopped right at the bigger 61.8% resistance level.

On the move lower to the next major area of support, I would expect price to bounce around the median support/resistance line on the broadening price pattern that I have been tracking.

NASDQ 100 Index Futures Contract (NQ) – 240 Minute Chart #2

The first support level should show up around 6630 and take place around Feb 18th … the final support level should be around the 61.8% level or 6285 and occur somewhere between Feb 26th and March 4th.

Cheers … Leaf_West

US$ Update – January 30, 2019 …

The Fed has folded and therefore I think my bigger thesis for 2019 (weaker US$ and higher gold prices) has a good shot at being pretty bang on.

Trade-Weighted US$ – Weekly Chart

The Fed doesn’t see any inflation, but if the US$ loses 6%+ inflation is sure to be more of a story later in 2019.

Trade-Weighted US$ – Daily Chart

It looks like the bounce into resistance is complete and that the US$ will restart its move lower here now that the Fed has cowed to equity bulltards.

Gold Miner EFT (GDX) – Weekly Chart

Gold and gold miners are headed higher, I believe, in 2019. Is the move an ABC or a 3-wave structure? It doesn’t matter as both target levels are much higher than the current price.

Gold Miner EFT (GDX) – Daily Chart #1

The mover higher out of the September 2018 low looks like it made a perfect end to the 2nd wave with today’s price action – we stabbed the 1.618x extension target perfectly with the end to what looks like a quick emotional move higher.

So if that was the end or the beginning of the end to wave-2, then traders should be looking for a pullback into SLOT support around the $19.90 – $20.40 levels. Then we push higher to make an end to the first move for our journey higher.

Gold Miner EFT (GDX) – Daily Chart #2

The TC2000 chart for GDX shows the extreme DI+ reading with today’s push.

Bottom Line – Nothing that I have seen so far in 2019 makes believe that GLD and GDX/NUGT are not going to be good swing trades. Monitoring the wave structure should allow traders opportunities to increase/decrease weightings as we go forward. Don’t get too cute, and make sure you maintain a healthy core weighting.

Cheers – Leaf_West

At Resistance – January 30, 2019 …

The emotion into the December 26th low and the large/strong 3 wave structure formed during the bounce from that December low confirms in my eyes the following price structure of the correction from the October 2018 high …

NASDQ 100 Index Futures Contract (NQ) – 240 Minute Chart #1

With the push today above the January 18th high (wave 2 high), it looks like we are completing a 3 wave structure into the down sloping line drawn off of the prior highs right around the 50% retracement level drawn using the Oct highs and the December lows as the anchors.

If that read is correct, we should be heading down into SLOT support on the next move. That would be a corrective wave, and will be followed by another push higher, possibly right into the 61.8% resistance level around 7000 on the NQ.

NASDQ 100 Index Futures Contract (NQ) – 240 Minute Chart #2

The above chart gives a better look at the 3-wave structure of the bounce from December … could we have made the high for this first bounce on the very day that the Fed gave the market everything it was crying about? It sure looks like it to me.

Cheers … Leaf_West

Inventory Reports and the Rookie/Beginner Trader …

As mentioned in earlier blog posts, my son Paul is putting in some serious effort in trying to learn more about trading, and I am doing my bit to try and help him.

Paul is trying to learn about trading intra-day currently, and has decided that natural gas is the instrument that he wants to learn with – I think that is fine in a way because he is specifically looking at the 3x leveraged ETFs DGAZ and UGAZ so that he can sim-trade an instrument that has plenty of intra-day volatility that will allow him lots of set-ups to look for/trade.

Paul probably doesn’t realize that natural gas futures have been nicknamed the “widowmaker” for how many people/traders it has brought to financial ruin, but so be it as Paul is only trading sim, and he seems to have a good handle on the basics that I am trying to instill into his psyche.

One of the things I can’t seem to drive into his head is trading around the weekly inventory report. My basic message is that he should know when the report comes out (nat gas is weekly on Thursday at 10:30am eastern) and for him to stay clear of trading/holding positions into and right after the report comes out.

Paul is having a hard time taking that advice in … I think he believes that he can trade the results of the report vs the actual consensus expectations going into the report. I don’t know how to say it more simply … even knowing the natural gas inventory report before hand will not give any trader an “edge” in trading the price action right after the report. That is not just with natural gas, it applies I believe to almost all markets, and to almost all possible market reports. It just doesn’t make sense to worry about the results of any natural gas inventory report … what Paul and all traders should worry about is the price action after any report, and to try and pick set-ups based on the fundamentals you are working on for any and all entry points.

For instance, this week’s natural gas inventory produced a withdrawl of -163 bcf vs an expectations range of a withdrawl of -85 to -166bcf. Nat gas is still well below the average 5-yr storage levels and is in fact near the average minimum of the range seen over the past 5 years. So what should a trader “expect” to occur to price when you get a report that is on the bullish side of expectations, and overall inventory levels remain bullish for nat gas? According to plain logic … Paul and other traders should jump long nat gas futures (or UGAZ for ETF traders) and count your money as it flows into your trading account. Here is the 5-min chart in UGAZ from this past Thursday .

3x-Leveraged Bullish Nat Gas ETF (UGAZ) – 5 Minute Chart – January 24, 2019

First thing to note on trading once the inventory report was released at 10:30am eastern … that 5min candle had a range of $1.29 ($45.80 – $44.51) which is almost triple the normal 14-period average true range in UGAZ right at that point in time. Paul knows enough to not try and trade during any large range/emotional candle, so I don’t know why he has a fixation to want to try and trade nat gas right after the inventory report!!

One of the fundamentals I have tried to impress upon Paul is to compare price to the 20EMA and the 20EMA’s signal line, and to use that basic fundamental as a sign of whether price is in a bullish or bearish slant – and then look to trade in that direction if the chart indicators are in agreement with that read and your other time frames are in sync as well.

Without seeing ahead in what price was going to do, what should have Paul done coming out of the inventory report? The answer again for those who are a little slow is NOTHING!! Paul and all other traders should just be patient and wait for the first real set-up before trying to enter a trade.

Marked as Point #1 on the above chart is the first real sign from price as to whether or not price was bullish or bearish … I would say that based on price alone, the action coming out of the inventory report was bearish – price had made a large ranging candle move lower that broke the 5min ATR support level, and had dropped below its 20EMA and the 20EMA signal line. In addition, the 20EMA had broken below its signal line, and so based on price and its position to those price chart indicators, traders should have been looking for possible bearish trade entries.

As an aside, a bearish trade should not have been your first thought if you had known about the actual results of the natural gas inventory report’s data going into that report’s release. That is just another example of how knowing a report’s (or any economic report for that matter) data beforehand do not provide any trader with a repeatable edge in trading price going into or directly after the release of that report.

Back to the read of price on the above UGAZ chart … despite the bearish look to price action on the 5min chart, Paul understands that traders need to understand what price is doing on the bigger time frames so they don’t get faked out by focusing on too small of a time frame.

3x-Leveraged Bullish Nat Gas ETF (UGAZ) – 15 Minute Chart

I identified the 15min candle where the nat gas inventory report came out this past Thursday … again notice the large range candle surrounding that report’s release. Paul knows better than to enter a trade during these types of candles.

So Paul knows that price will often pullback to consolidate right at the 20EMA and that is exactly what the 15min chart did in this example … so despite the bearish look to the 5min chart coming out of the inventory report, traders/Paul could see that the bigger trend on the 15min chart was actually still bullish and now making a nice two candle consolidation right back at the 20EMA … the candles were smallish in size and were in fact, inside candles (identified with the small white dots above the candles), so Paul should have been pretty confident that price was likely finishing its pullback and he should be actually looking for evidence of a good BULLISH trade entry on the 5min chart instead of the first thought about price being bearish coming out of the inventory report.

3x-Leveraged Bullish Nat Gas ETF (UGAZ) – 5 Minute Chart

I put the 5min chart back up here so we can look again at price to see when the first real bullish setup occurred … identified as Point #2 is where price had actually bounced back above the 20EMA with bullish looking candles (close > open; hammer) and eventually the 20 EMA made its way back above its signal line.

Also note that the chart indicators – the DI+ made its way above the DI- indicator marking a bullish move … the 20EMA Rate of Change changed directions from a downward slope/direction (Bearish) to an upward sloping direction (Bullish).

So the first trade that made sense coming out of the inventory report was in fact a bullish trade … I guess Paul would have been right if he had blindly entered a long trade the second he saw that the report was on the bullish side of expectations – LOL!!!

Obviously I am being sarcastic here … I’m trying to drive into Paul’s head to only enter a trade when he can see hard evidence of price moving in a given direction. To me it that was not the second the inventory report was released with bullish results … it was when price made it back above its 20 EMA on the 5min chart. The actual entry point could be determined using the 1 and 2-min charts.

3x-Leveraged Bullish Nat Gas ETF (UGAZ) – 2 Minute Chart

I identified the first area on the 2min chart where price was clearly signalling a bullish posture/move … two bullish looking candles that broke above the ATR resistance level; price was back above the 20EMA and the 20EMA was in a bullish position relative to its signal line.

3x-Leveraged Bullish Nat Gas ETF (UGAZ) – 1 Minute Chart

The 1 min chart as also in a bullish position and had clearly shown/indicated that the earlier break above the 1min resistance ATR level had been accepted by price. All chart indicators were pointing for price to continue pushing higher. No one knows how far, but the 15min, the 5min and the 2min charts were telling traders that price wanted to go higher here in a high-probability setup.

That was the real lesson from Thursday and the release of the natural gas inventory report … it wasn’t “knowing” before hand what the results of the report would be, it would just be that the report was likely to cause some volatility in the market and traders should be prepared to enter the first set-up that presented itself.

Lots of spots to enter a trade were I’m sure evident before the set-up I noted above, but I’m trying to teach Paul to enter trades that have high probabilities of success. Making consistent money demands that type of mindset.

Cheers … and Paul, get back to studying the charts instead of spending time talking to your girlfriend down in Latin America!!

Leaf_West

Can You Say “Bankwupt”??

TSLA Daily Chart

Price is pushing for the third time in the last little while to break down below the broadening price pattern in TSLA … with the almost $1 billion convertible junk debt deal maturing this March with a conversion price around $360, I think the writing is on the wall for Elon …

One of the biggest things I don’t understand is all of the stories about how owners of new TSLA can’t get the final VIN’s from TSLA so they can register their car and get loans against them/get them officially registered. Some of the stories I have read imply a big ponzi scheme where Elon is taking advantage of secured lines of credit and the actual cash from the sale of the cars to try and keep things afloat. By delaying the release of the VINs Elon is able to ineffect get paid twice for the car – this only works for so long however, and I think the next 6 months will see TSLA collapse and end up only seeing the brand saved by a sale to an existing car manufacurer. What price will that happen at?

TSLA Weekly Chart

Maybe $150 – $200 a share?

Cheers … Leaf_West

A Trader in Training …

My son Paul who is 25, is very keen on better learning how to trade stocks. I have been trying to teach him as best as I can about the right way to go about learning, and all I can say is that I wish I had someone with as much knowledge helping me back in the day.

I’m trying to keep it simple, and teaching him basic principles that he can apply to intra-day charts at first, and then eventually, learn how to transport those fundamentals to the bigger task of swing trading using 195min/daily/weekly/monthly charts.

I won’t go into detail, all that I have try to teach him so far with the blog post, but I think it might make sense to sort of pick up the general ideas behind the biggest points he is trying to learn and put it down in blog post and PDFs so other readers trying to learn trading can also benefit.

So a bit more of a background on Paul – he is 25 as mentioned and has a good job in marketing/sales at the Canadian division of Genreal Mills (GIS). He has done a really good job saving money, and despite my warnings/cautions, he has been aggressively investing the past couple of yearss in both pot stocks and crypto stocks (along with others). Thank God Paul listened to my warnings well at times when I was telling him how/when to take profits. Paul even listened to me when I told him to buy GIS as part of the tax-loss trading I was doing in December … he texted me the other day feeling pretty good about all the money he has made on his corporate stock the last month (lol).

Anyways, some of the best advice I have been trying to impress upon Paul is that he should not try to pick tops and bottoms in stock moves, and that he should only enter a trade once he has “evidence” that price is moving in the direction he wants to trade. That generally has him looking at price in relation to the moving averages and price relative to the support/resistance ATRs.

Paul is trading in a sim account while he practices intra-day trading, and he has keyed into the 3x leveraged nat gas stocks DGAZ and UGAZ as his vehicle of choice the past little while because of all of the intra-day volatility. He’s making sim money and when I get him to explain in writing why he entered a trade where he did, it is obvious that he has listened fairly well to our lessons, and I think he his well on his way to a life long journey/education in successfully trading stocks.

So he told me the past couple of days about a couple of his trades on Thursday/Friday but I won’t bother telling you about what he actually said … bottom line is that he did the right thing on his entries. I will share with you the charts that I just emailed to him with a copy of my summary comments I made about those charts – all of the comments are basically the principles to what I am trying to get Paul to learn.

Here is the DGAZ 5min chart …

DGAZ – 5 Minute Chart

The above chart is from TC2000 and Paul has the same system along with the same chart indicators. The basic ones I have him following are a 20EMA and 8SMA signal line calculated off of that 20EMA. The charts also have ATRs and inside candle markers.

The next panel has DI+ and DI- indicators along with the ADX histogram which is basically the same as my trend strength histogram other than the values shown – mine are using 100 as the extreme level marker instead of the above ADX reading of 55.

The last panel is the 8-period Rate of Change drawn from the 20EMA … pretty much the same as my MA Spread indicator.

Here are the points I shot over to Paul in a quick email …

  • Early on, price could not get back above the opening 5 min candle’s high … eventually, price broke back below the moving avg’s (Point #1) … you could have been suspecting a break lower, and therefore prepared to either short the DGAZ or gone long the UGAZ (see next chart).
  • Point #2 … if you waited for the 5min ATR break before going short, you could have watched the push into the 20EMA and tried a short at that point … the DI- was confirming a downtrend and the ROC of the 20EMA was still pointing lower (the ROC was moving down and to the right).
  • If you didn’t see this chart until Point #3, you still had evidence that price was going lower … you could have tried to short the bounce into the 5min 20EMA.
  • Point #4 … the trend strength histogram was in the extreme strength warning zone so you should have suspected that the move lower was probably done much of what it was going to do … you should have taken any profits and not looked to short any bounce into the 20EMA.  Count your profits and call it a day.
  • In theory you could have played the bounce back up higher, but you never know if it will just chop sideways in such a strong down trending day.  One of the clues that could have led you to go long was the distance that price was from the 20EMA … in essence the rubber band was really stretched and likely going to see a bounce higher that you could try and profit from.

UGAZ – 5 Minute Chart

The opposite to the bear natural gas 3x ETF is the bullish one – UGAZ. The exact same chart should appear here from Friday, with some minor exceptions. Here are the points I made to Paul in an email earlier today.

  • price actually was able to peak below the low of the opening 5min candle … however, it wasn’t ever able to close the 5min candle below the low of the opening candle so you could have been looking for or expecting a bigger move higher at least to start the day.
  • Point #1 … price made it above the 5min moving averages and was consolidating there … more evidence that price wanted to move higher.  Price finally broke above the ATRs and pulled back to the 20 EMA (Point #2) where you could have looked to enter long
  • Point #2 as mentioned was the first pull-back to the 20EMA after breaking the 5min ATR.
  • Point #3 was the next pull-back to the 20EMA and the next good place to enter a long if you wanted to add to your trade or if you did not partake in the earlier entries. You should have utilized the 1min and 2min charts to get your entry better timed for that 5min pullback.
  • Point #4 … extreme warning on the trend strength histogram … take profits and don’t look to buy pullbacks.  Short here at your own risk.  Note the inside candle markers at the top right after a doji candle – signs of balance in buying and selling which indicates that buyers are no longer winning the battle anymore.

UGAZ – 2 Minute Chart

UGAZ – 1 Minute Chart

So there you have it … I think I am going to try and document the lessons I am trying to help Paul with going forward as they are also good reminders to me of the fundamentals that all traders should keep in mind as you trade every day. Look for more posts and PDFs going forward.

Cheers … Leaf_West

ES & RUT Roadmap – Jan 19/19

Further to my more indepth road map on the NQ futures contract, it makes sense to see how the other major indexes are doing. Due to their rough similarity, I am assuming for simplistic case that the pattern for the ES and RUT are also ABC’s even though I am not 100% totally convinced they are because of the 1.618x extension target levels hit by the December lows.

This analysis is more about the bounce and where we go from here …

S&P 500 Index Futures Contract (ES) – 240 Minute Chart

So it appears that we are in the bigger SLOT resistance zone drawn off of the top of the October highs down to the December lows. It also looks like we are near the completion of a 3-wave price structure for the bounce off of those Dec lows.

Russell 2000 Index Futures Contract (RUT) – 240 Minute Chart

The RUT is in the SLOT drawn off of the November bounce highs down to the Dec lows … we are also nearing the downtrend resistance line drawn off of the prior two highs.

Bottom Line – it looks like it makes sense that we are at or very near a logical resistance spot for the major market indexes.

Cheers … Leaf_West

NQ Road Map – Jan 19/19

So no one said trading was going to be easy … I try as best I can to follow my chart indicators to confirm/raise suspicions about my price structure reads, and adapt on the fly as necessary. I thought it would make sense to review my read to-date, and try and see what the charts are suggesting from here.

Ok, the first snapshot should look back at what my last major read was.

NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #1

So I have gone over in prior blogs why my read was what it was … suffice to say, when price extends to the 1.272x extension level, that is almost always the end of an ABC structure, and when it extends down to the 1.618x extension target, the price structure is almost always wave 2 of a 3-wave structure.

You can see that because of where the Dec low pushed to (i.e., the 1.618x target) I thought we were in the process of completing only the 2nd wave of a bigger 3-wave corrective structure. We will look at the bigger structure in a bit, but that is why I thought what I did.

On a smaller wave scale, it appeared at the time, that the Dec lows had not completed the smaller 3-wave structure that was making up the bigger 2nd wave. As mentioned, counting smaller waves is inherently more tricky and often less obvious … I make many errors when trying to determine smaller time frame waves because of the natural minor movements of price during these smaller time frames.

Long story short, I thought we would bounce off of the Dec lows and then push back down to make a new minor low just below the Dec lows. My software was painting dark blue extreme trend strength warning candles with pink divergence dots, and often price makes one last little push to new minor lows when these dark blue candles appear – not always, but quite often they do that one last push to extinguish the selling pressure.

NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #2

So the bounce off of the Dec lows has been a V-bounce which are pretty rare … less rare during the whole QE-fed program of the past 10-years, but they are pretty rare nonetheless.

You can probably see the look of a 3-wave structure in the bounce off of those Dec lows and how price has pushed throught the SLOT resistance area I was monitoring. Price has just pushed into the resistance line drawn off of the tops of the corrective price action so far since the Oct high.

Because of the strength of this bounce off of the Dec lows, I think it makes sense to look at the entire corrective move as a possible ABC, and therefore, the lows may be in for the next several months. I don’t like to assume that something rare has occurred, but the emotion entailed in the December selling may have been something that caused a rare extension in a wave structure.

Before we go further, let’s look a little closer at that move into the Dec lows and the bounce seen since then …

NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #3

So again, trying to count the smaller waves inside bigger structures is often tricky … I can see 3 smaller waves down into the Dec low, but you could also argue, like I have done previously that there were only 2 smaller waves.

Because of the strength since the Dec lows and the fact that we busted through the SLOT resistance zone I was watching, I think you have to argue that there were indeed 3 smaller waves and that price structure down into the Dec lows was complete … the only question is whether or not the Dec lows was the end of a C-wave and therefore a possible end of an ABC corrective pattern off of the Oct highs. If it was, then there is a chance that we are going to retry/retest the Oct all-time highs.

Or was the bounce out of the Dec lows “extra” strong because of the emotion involved in the late-month flush, and therefore, price was able to get through the SLOT resistance to the more important down trending resistance line off of the prior highs seen in the corrective pattern so far? If that is the case, then price could still be headed down to make a complete 3-wave structure that would make more sense considering where the Dec low was made at in terms of extension targets (i.e., at the 1.618x vs the 1.272x seen at wave-C lows).

Or we could be making an even more complex corrective wave off of those all important all-time highs made in October – remember, if those October highs were indeed the end of the bigger weekly 3-wave pattern off of the 2009 lows, then traders should not be surprised by a complex corrective structure off of those highs. I just don’t think that a simple ABC down to the Dec lows is complex enough to get the whole correction complete and we are therefore about to head higher on a new bull run to new highs.

Here is a possible look at what might be ahead of us …

NASDQ 100 Futures Contract (NQ) – 240 Minute Chart #4

So as shown above, anything really is possible ahead of us … all we can do is monitor the waves as they unfold, and then anticipate where we are heading to next.

All I can say right now is that I think we should be at a logical area of support, it appears we have a complete smaller 3-wave structure into this upper trend line, and we did that right into a monthly OpEx. I have noted several times on tweets and blog posts that price will often pivot right around OpEx expiry dates – if that happens here again in January 2019, then it would make perfect sense because of the look of a complete wave structure, extension targets getting hit, and finally, pushing right into that upper resistance line drawn off of the corrective pattern’s highs.

If we have made a top, then it make sense for price to at a minimum, head down to SLOT support … the 61.8% level is at 6205.50 currently. Price could bounce off of this level and then make the next bigger push higher, or it could fail at bouncing and we head lower to complete the bigger 3-wave price structure that I was originally calling for.

Bottom Line … I’m looking for a pull-back to begin anytime here, and we will see what happens as we move into SLOT support.

Cheers … Leaf_West

2018 Tax-Loss Selling – Final Report

So this year’s tax-loss selling set-ups was unlike any I have executed over the past several years – the late-year selling in the overall market made it unlike any year-end that I can remember being a part of. I think I heard something to the effect that this past December was the worst in performance terms that the market has seen going back to I believe 1931.

So in the end, I was busy trading the market into year-end/early January, but I wasn’t really focused on tax-loss selling candidates. I ended up with only three positions that came out of my work … I continue to hold call March call options in VLO that I may end up taking profit in and rolling the strike up from the $70 level that I own currently – the stock is at $82.68 and it makes sense to roll it up to say $80, book a winner and let it go for another month or so.

My other oil & gas play was in APC ($55 call strike) and it expired worthless yesterday. My only other tax-loss position was in January 250 NOC calls which I sold it for a nice little win on Thursday.

So overall, tax-loss candidates were a real non-event for me this year … that almost guarantees that it will be a big factor next year!!

Here is the final data/watchlists that I was monitoring/keeping track of …

The above charts shows how the market basically bottomed together on Dec 26th … that is so unusual for my tax-loss strategy, but like I said earlier, it has been a strange/non-typical year this past year.

Watchlist Sorted by Change Since Nov 30/18

The above chart is sorted by the percentage change in stock price from the Nov 30th closing prices – note that only 17 out of the 45 stocks on the list are above their Nov 30th closing prices. The leader is GE, and that was one name that I did not want to trade because of the low price level of that stock – it didn’t make sense to trade using options, and I didn’t feel like trading 10,000 shares in a name that was facing questions about possible bankruptcy.

Watchlist Sorted by Change off of Dec 2018 Lows

The above watchlist is sorted by the % increase off of each stock’s December lows – the leader was Nektar Therapeutics (NKTR). That stock bounced 58.11% off of Dec low of $29.22. Note that 7 out of the top 10 on this list were energy stocks – that what I was referring to when it makes sense to look at the list every year in terms of sectors, because there may be other stocks from common sectors in that tax-loss list that a trader can trade in addition to the actual tax-loss candidates … sectors often bounce together.

The above chart is the final summary of all that has happened in these names. The thing to note is on the bottom right … you can see that in all respects, most of the names on this list outperformed the overall market (using the SPY as the reference) out of the Nov30th levels, the Dec lows, and the year-end prices.

If you look at the average for the watchlist, the change from the Nov 30th level was -0.8% vs the SPY at -2.6%. The change from the Dec lows averaged +25.4% for the watchlist vs +14.1% for the SPY, and finally, the change since Dec 31st for the watchlist average was +15.9% vs +6.8% for the SPY.

Note that all of the final price data utilized was adjusted for any and all dividends paid by the SPY and the watchlist names.

So again, I think that this strategy will be big value-added next year as I can’t imagine having two back-to-back year ends like the one we had this year.

Cheers … Leaf_West