Looking For A Pullback

I expect a pullback at minimum this week, despite the Apple hoopla. Last year the market topped out on news that Osama Bin Laden was killed as the news is always the best at the top and worst at the bottom. There are quite a few reasons to expect weakness:

  • The put/call readings late last week at both the ISE and CBOE showed the type of exuberance not seen in a year.

  • Option expiration often serves to perpetuate a strong rally and then we see a hangover. I have seen many market turning points right after option expiration.

  • The IPO and secondary offering calendar are pretty heavy already for this week and we are likely to see more secondaries announced. Insiders have been selling aggressively and there's no reason to believe that will stop.

  • Quarter end rebalancing will be negative for stocks as stocks soared this quarter and bonds plunged.

  • A host of indicators are at extremes such as Rydex and Consensus.

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