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UPSIDE-DOWNSIDE VOL


BID-ding Down The Market?

10/04/11 12:38:28 PM
by Matt Blackman

Sotheby's has proven to be a reliable proxy of a bubble in markets, and it's just taken another hit.

Security:   BID
Position:   N/A

Auction company Sotheby's (BID), discussed in Vikram Mansharaman's 2011 book "Boombustology" as a valuable indicator of a market bubble breaking, is again showing signs of stress. See Figure 1.

FIGURE 1: BID, DAILY. Here's the daily chart showing Sotheby’s (BID) versus the S&P 500 (blue) and the Nikkei 225 (red), the latest peak of which occurred in April 5, 2011, a month before the peak in the SPX. As of month-end September, BID stock had been since cut in half versus a 17% drop in the SPX from its peak in May. In addition, note the negative divergence of BID compared to the SPX.
Graphic provided by: www.GenesisFT.com.
 
BID went public in 1988 and exhibited an incredible growth of 375% from September 1988 to October 1989, providing a warning months before the Nikkei 225 Index peak. BID then warned of a peak but this time in the US markets in April 1999, 11 months before the Standard & Poor's 500 and NASDAQ peaked in March 2000.

Sotheby's next peaked in October 2007 but at the same time as the SPX. Its latest peak occurred in late April 2011, and it has dropped more than 50% since then, compared to a drop of 17% for the SPX.

A story in Bloomberg News on October 2 shows that BID and the markets are still under pressure. BID failed to sell all of its wine in the latest Hong Kong auction, generally well attended by wealthy Chinese buyers. It was the first time that had happened in 17 auctions.

This is further confirmation that BID remains in a strong downtrend and that the April peak was in fact warning of a wider market top. For more on this phenomenon, please see "Is Sotheby's A Bubble Proxy?" http://technical.traders.com/tradersonline/display.asp?art=5972.



Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. He is the host of TradeSystemGuru.com. Matt has earned the Chartered Market Technician (CMT) designation. Find out what stocks and futures Matt is watching on Twitter at www.twitter.com/RatioTrade

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