Market Preview: Bear Scare

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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.

The S&P 500 fared a little better. The index dropped back below 1400, losing 0.5% in just its second negative week of 2012, but it's still up 11.1% since the calendar turned. The bulletproof Nasdaq Composite bucked the trend, rising 0.4% for the week, putting it up 17.8% in 2012.

The coming week could see some positive momentum from window-dressing as portfolio managers have been known to buy up winners at quarter's end, but if TrimTabs is right, the market may need retail investors, who continued to pull money out of mutual funds investing in U.S. equities this week, to get into the act.

Meantime, one strategy that's been foolproof in 2012 has been buying Apple ( AAPL), which had a minor disappointment last week as it proved unable to hold $600 but still finished the week up 1.8%, leaving the stock up 47% year to date.

Oppenheimer took on the daunting task of trying to build out a bear case for Apple on Friday, and its conclusion will likely assuage those concerned the stock has come too far, too fast.

"Our analysis suggests a compelling risk-reward outlook with a ~$900 (50% upside) bull case upside while a bear case leads to a ~$420 level (30% downside)," the firm said. "Considering that our bear case assumes almost a complete halt to Apple's growth in FY13/14, a scenario likely only in a severe economic downturn, we believe the risk/reward is very compelling."

Oppenheimer, which has an outperform rating and a $700 price target on Apple, sees the continued success of the iPhone as the "key swing factor" in its thesis, and said it sees "opportunities to expand carrier/customer reach and move further into the mid-tier as key drivers."

Check out TheStreet's quote page for Apple for year-to-date share performance, analyst ratings, earnings estimates and much more.

As for Monday's scheduled news, there's very little to look forward to, with the biggest earnings names being Calmaine Foods ( CALM) and Apollo Group ( APOL). Pending home sales for February is the only piece of economic data on the docket, scheduled for 10 a.m. EDT.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.