We preview January`s earnings releases and how massive the gap down in most of these stocks will be when they report next month. There have already been two companies guiding downward this past week, industrials UTX and HON. 

But with the run up in financials and energy for the last month we are going to experience big $5 chunks taken out of these stocks and massive after hours and pre-market gap downs that will cause entire sectors to sell off during earnings in January. It is just going to be brutal; expect 500 point down days in the Dow during this upcoming earnings period. 

You have seasonal stocks that selloff every year like Apple (AAPL) and Amazon (AMZN), as the 4th quarter is their best by far for sales and revenues. And you have energy companies with exorbitant p/e ratios like COP, XOM and CVH that are priced for $115 dollar oil not $55 oil. Those 4th quarter earnings releases are going to bring some fundamental realities back to investors of how overpriced these stocks are right here. 

You have "dogs***" stocks like C  and BAC that are serial underperformers in the financial sector along with WFC with its legal problems and operating distractions of the past year, and JPM which has moved too far entirely too fast. The amount of selling smackdowns of these financials upon reporting is going to be outright brutal for investors foolish enough not to have taken profits before earnings. 

Not to mention all the other broken companies that have been lifted up in this 4th quarter rally, and are going to be taken out to the woodshed for a beating when they report. Throw in all those investors who don`t take profits for tax reasons who will wish they did as everybody sells in the new year at the same time running for the tax exits together, and this January 2017 earnings period is going to be outright one of the worst we have seen since last January`s massive stock selloff.

It is the difference between being able to use a selling algorithm program that gets a decent price for the closing of the position versus taking what the market gives you during selloff and gap down closing of positions where profits are annihilated in a very short timespan. Investors need to evaluate all of the parameters when making tax deferral decisions, and it isn`t as simple as they always mistakenly calculate when making these boneheaded calculations. No wonder they cannot outperform the market, you have to take profits into strength, not weakness when everybody and their brother is selling.

Why investors continue to exhibit the same patterns is beyond me, but the smart ones will be selling in the next two weeks to beat the carnage selling that occurs in January due to tax deferral selling, and reality setting in that no amount of Trump magic can make these pig stocks' earnings for the 4th quarter look good relative to the current stock prices.

It is going to get ugly.