TrimTabs’ Biderman: ‘April Could Get Pretty Wild’ for Stocks

Wednesday, 27 Mar 2013 09:23 AM

By John Morgan

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Hold on to your stock portfolio. TrimTabs founder Charles Biderman predicts seasonal factors will spark big market swings in the coming weeks, and the result could be particularly tempestuous if corporate buying does not continue at high levels.

Biderman said conditions will be unsettled despite two underlying bullish influences.

The first bullish factor is related to the Federal Reserve’s policy of quantitative easing. “The Fed is pumping up stocks by creating $4 billion of fake money every day,” he explained.

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

The second bullish factor is ongoing corporate stock buybacks. “Companies are shrinking the float of shares by about $2 billion every day,” he noted.

Nevertheless, Biderman expects a “very volatile stock market through April,” prompted by the start of a new fiscal quarter on April 1 and the federal tax deadline of April 15.

“For some reason many investors, particularly institutional types, like to invest the first week of a year, quarter and month,” he said.

According to Biderman, the immediate stock market direction will be down — he believes many portfolio manager will be taking profits this week from a profitable first quarter that ends March 31.

But then stocks will go up again for the first week of April as the aforementioned new quarter and new month buyers emerge, only to be followed by fresh downward momentum again that should continue into the federal tax deadline, he predicted.

“My best guess is that billions of dollars of stock will be sold between now and April 15 to pay taxes,” Biderman said “And when the market has been as strong as this one, up 20 percent since the start of 2012, lots of taxpayers are waiting until the last moment to sell.”

Biderman’s market-timing scenario follows a familiar script – stocks should go back up after April 15, as “billions of tax-oriented investments are deployed by the end of the month.”

He recalled 2000, when the Nasdaq 100 plummeted 25 percent the second week of April, only to gain 19 percent during the last two weeks of the month.

“Let me emphasize that I do not expect that kind of volatility this April. But April could get pretty wild if corporate buying does not remain as high as it has been.”

From a technical standpoint, there is reason for investors to be bullish in the short term, according to MarketWatch columnist Michael Ashbaugh. All three major averages — the Standard & Poor’s 500, the Dow Industrials and the Nasdaq Composite — are in positive shape on the charts, Ashbaugh explained.

In particular, the S&P 500’s all-time closing high of 1,565 was nearby on Tuesday, and he noted the current technicals indicate an eventual break higher above that figure.

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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