There’s green on the equity futures screens for Monday, and that may come as a relief to those braced for more selling after the S&P 500 fell to a five-week low on Friday. If that rout was caused by quadruple options expiration as some believe, then investors will see that reverse to start the week, says Matt Maley, Miller + Tabak.’s chief market strategist.
“However, if this is not the case…and we see ANY downside follow-through…it’s going to raise some serious red warning flags for the stock market,” he told clients. Strategists like Maley are particularly wary after the index failed to break above its important 200-daily moving average last week, and he says 3,200 or lower can’t be ruled out if downside sticks.
Miller + Tabak
So how to salvage a year that feels like one lump of coal after another? How about harvesting some tax-loss castoffs. That’s the advice from our call of the day, provided by Julian Emanuel, chief equity and derivatives strategist at Evercore ISI and his team, who are referring to that traditional end-year process in which investors sell their stock losers to reduce capital gains elsewhere. Stocks that have “endured historic tax-loss selling pressure yet have favorable earnings, short interest and price momentum profiles headed into the New Year could prove to be ‘gifts’ for patient long term investors,” says Emanuel and the team. “Such stocks were swept lower by the tidal wave of selling that pushed indexes to new bear market lows in October, into the traditional mutual fund year-end tax-loss selling window,” said Evercore strategists. “While tax-loss selling season remains under way for retail investors whose accounting year ends in December, opportunities have begun to materialize.” They screened for so-called “gift boxes” stocks across the Russell 3000, a benchmark for the entire stock market, looking out for characteristics such as:
deeper-than-average drawdown from pandemic peaks, still underperforming year to date
signs of stabilization since October lows,
2023 profitability and upward earnings per share (EPS) revisions
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