Has Tax Loss Selling Kicked Off Already?
So many stocks are down and out so early this year.
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Tax loss selling. Is it a real thing? It can be.
I have seen years where down and out stocks stay down and out. I have seen years when they rally well before year-end. And I have seen years where they literally plunge at different points in the fourth quarter. I am sure some statistical wizard has some data on when it matters and when it doesn’t. But today I want to take a minute to note how many stocks, names that you would know quite well, would be candidates for tax loss selling this year.
We can start with many of the old-line drug companies like Merck and Bristol Myers. But what about staples? My gosh, did you see Colgate plunge to a new low on Monday? And it’s not as though Procter and Gamble and Kimberly Clark are trading much differently; they simply haven’t made new lows yet.
The Transports actually don’t have as many as you would think, considering their lackluster performance. JB Hunt and UPS would be on that list.
We already know the restaurants that I have harped on about endlessly for the last several weeks. Then there are the ‘pays’ like Paychex and Paypal.
In retail, there’s Target and Lululemon. And Adobe needs an AI strategy fast!
I bring this up because this really has been a stock picker’s market. Even on a day like Monday, when the major indexes managed another up day and breadth was flat, we even had some pickiness among the mega cap names.
Meta, Google, and Amazon were all down on Monday. Is a rally in NVDIA now sucking the life out of them, not just the 493? Amazon has yet to make a higher high than February and now sits smack on an uptrend line. Maybe tomorrow it will get saved and become the stock of the day, but I find it curious no one gets excited over this stock anymore. They must have some AI thing they can talk about!
In any event, the indicators did not change on Monday. Breadth was better than Friday in that the net breadth was flat, whereas Friday it was downright negative. The number of stocks making new lows remains high, while new highs are nothing to write home about.
And sentiment? The Daily Sentiment Index (DSI) doesn’t even budge anymore! The S&P is at 82. Nasdaq is at 84. These are the same readings they had last Thursday. Even that massive move in Gold didn’t get its DSI frothy as it too is at 82. So is silver!
Finally, there is the Overbought/Oversold Oscillator, which inches closer to the zero line. Hey, at least if/when this gets under the zero line, we can start thinking about a rally in the 493 again.
Wishing all my Jewish readers a happy and healthy New Year.
