Incoming Supply

The treasury is selling at least $13 billion worth of AIG shares to the public this week while insiders at Michael Kors are selling over $1 billion of shares. It is possible that the secondary calendar approaches $20 billion this week, which is a number not seen very often. I believe the market will have  a tough time digesting that much stock and continuing higher. At best I see the market treading water.

As a result of the heavy secondary issuance calendar I decided to short SPY in the pre-market and move to a roughly market neutral stance from an already defensive stance. I was originally planning on waiting for  the sentiment indicators to confirm my suspicion that market participants are excessively bullish. However, with this much supply the short term upside should be limited regardless.

 

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