Sotheby's Holdings BID Weekly - Oversold Relative to SPX - Pairs

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Sotheby's stock used to be a very good leading indicator for when the euphoria of Wall Street had carried over into auction-houses. By the time Sotheby's stock would have it's big rise and then start to fall, it meant the bloom was off the rose for the market and it was time to head for the exits. This worked on many occasions. Here it is again, yet unfortunately this is just telling the story that the IWM/Russell 2000 Index is telling us too. That money is coming off the table and yet the overall market is holding up as investors chase yield and pile in for some profits.

Look at the late 1990's pattern where BID started crumbling down well ahead of the market overall. This also happened in 1990, and you can scroll back and see for yourself.

BID doesn't always get it right, but it is interesting. Sometimes it is a "false warning" and they seem to alternate signals, "foretelling" and then "false warning". Nothing is perfect. But when speculation comes off the market, like it has in BID lately, it can mean that cooler heads are prevailing and that cash is building up on the sidelines.

Pairs Trade: The trade is long BID, short SPY             ( DIA             or SPX             ).

With the VIX             so low and the market so high, this is about the cheapest you will ever be able to sell your stocks and replace your portfolio with call options and sit on the sidelines and wait for the fundamentals to catch up to the stock market.

Tim 2:14PM EST, May 22, 2014
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Very nice chart! Had heard about the relationship btw BID & SPY & didn't know what to think about it......this could be foretelling or false warning but still seems too early to decide. Like the pairs trade as well and agree that VIX is really cheap right now which gives options buyers a great opportunity to buy options like you said.
$BID like $WMT are stocks that show the true state of the economy. FED keeps rigging the $SPY and $USDJPY till the end...
+1 Reply
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