4.16.10
It’s interesting that while the sentiment of options players, brokerage firm advisors, public investors, newsletter writers, etc., the groups that are considered to be ‘contrary indicators’, have reached high levels of bullishness, at the same time corporate insiders have been selling into the strength. Trim Tabs Inc. reports that insider activity in March was decidedly on the sell side, with insider selling amounting to $6.9 billion, while purchases amounted to only $0.83 billion.
The market cannot be timed by investor sentiment alone. However, just as the major market indexes were oversold beneath their 20-week moving averages at the market low last March, they are now overbought above those moving averages. A potentially overbought market, and unusually high bullish investor sentiment, just as the market approaches the time when traders will be thinking of the Sell in May and Go Away maxim, is probably not a comfortable situation for bullish investors. However, it usually takes a catalyst to reverse market direction even when the conditions are in place for a potential reversal.
Could Friday’s surprising news that the Securities & Exchange Commission has filed civil fraud charges against Goldman Sachs possibly be that catalyst?
Goldman was the golden bank during the financial collapse in 2008, favored by the Treasury Department and SEC. The SEC alleges that Goldman sold investors $1 billion worth of mortgage-backed securities in 2007 that it issued at the request of a large hedge fund client, Paulson & Co., which wanted the securities to sell short on expectations that they would plunge in value. If true it could have implications for financial firms that are not as highly respected as Goldman Sachs. One positive result is that Wall Street firms will have a harder time now in lobbying to have proposed regulatory reforms watered down.
The market has an interesting week ahead. We will be happy to be on the sidelines 100% in CASH.
Till next time
The MTA Staff
