I've followed Sotheby's for a couple of years as it has been said that the stock has marked the tops of markets as it rolls over.
Take a look at this monthly chart for BID and you can see quite clearly that the first peak was March of 1999 which was followed by a drop of about 65% in the stock. The second top was October of 2007 in the financial crisis which fell by 89%. April of 2011 was the top of Sotheby's in the latest bull run and if the two previous instances can guide us at all we might see a drop to the 20 level. We'll dub this latest collapse "THE LEADERSHIP CRISIS".
IS IT TOO LATE?
Now you may say, "Goat, that is great, you put this post up after a 20% drop from the high in the overall markets, how can this help?" Well, my answer is simply this, that these top marks are confirmation that we need to wait for a bottoming in BID to turn bullish on the market again.
In all of these previous times, BID topped out first and fell hard. I've used SPY in comparison and we find that each peak to trough was a fall of at least 50%. If we see that same sort of fall over the next weeks or months or a year, this indicator could have us on the look out for a 680 SPY level as a bottom target (137 was top of this last run for SPY).
Just thought you'd find this interesting.
Just an update. I personally did not add any long positions today related to the post of adding more gold, commodities, or dividend players. I did try to go long some SPY calls and was immediately stopped out. Just another reminder not to get too cute when a bear freight train is flying down the tracks. That small trade cost me little, but reinforced to me how it is not worth trying to catch the exact bottom, patience will be rewarded. Having said that, the BID chart suggests that the real bottom my be way down the road.
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