This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Market Preview: Bear Scare

Stocks in this article: AAPL ZNGA KORS ^GSPC ^DJI

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

NEW YORK ( TheStreet) -- Was last week the beginning of the long-awaited pullback in stocks?

TrimTabs, for one, is getting more cautious. The research firm on Sunday went to cautiously bullish (50% long) on U.S. equities from fully bullish (100% long).

It cited a shrinking gap between corporate buying, which it defines as new cash takeovers and stock buyback activity, and corporate selling, which includes new share offerings and net insider selling.

Corporate buying is at $46.5 billion so far in March, TrimTabs said, just $15.2 billion higher than corporate selling of $31.3 billion, which is the narrowest gap seen since May 2011.

"The Federal Reserve has pumped out so much free money that public companies have been using balance sheet cash to buy back many more shares than the public -- including retail investors, pension funds, and hedge funds -- has been selling," the firm wrote. "Now it is share selling by companies that is ramping up."

Insider selling is up to $4.7 billion this month, and TrimTabs said that translates to an insider sell/buy ratio of 20.8, the highest since February 2011. The firm expects the trend to continue until the market buckles under the strain, and it noted next week's docket already includes plenty more selling, including some opportunistic secondaries.

"Given the lofty valuation of the overall U.S. stock market -- the S&P 500 trades at 23.2 times 10-year trailing earnings -- we expect companies and insiders to sell huge amounts of shares as long as stock prices do not crack," TrimTabs said.

The firm continued: "Eleven new offerings expected to raise a total of $2.5 billion are already scheduled to price this week, including a $650 million secondary for online gaming favorite Zynga (ZNGA). Like the proceeds of the $1.4 billion secondary for Michael Kors Holdings (KORS) that priced in the past week, the proceeds of the Zynga deal will go to top insiders and shareholders, not the company. When we start seeing these types of secondaries hitting the market, it raises a big red flag."

Last week's action presented the first real bear scare in a while for the markets with the Dow Jones Industrial Average falling 1.2%, its worst weekly performance since mid-December 2011. The blue-chip index is still up 7.1% year-to-date, but it has now fallen in three of the last four weeks.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs