Market Bottom? Just ask Goldman

The Wall Street Journal's MarketBeat Blog recently highlighted how Goldman Sachs has become the market's number one 'tell'.  If you want to know where the market is going, just ask Goldman.  In the chart below, we plotted the returns of Goldman Sachs (left scale) vs. the returns of the S&P 500 (right scale).  While the returns are vastly different, the two have tracked each other very closely over the period shown.

What does this imply for the market?  Well, given then fact that GS managed to easily hold its lows from last week, this would imply that the market's reversal today indicates a successful retest of last week's lows.

Comments

[Matthew]

actually, the chart does not show that Goldman has been a good tell. To the contrary, it shows that the overall market is a good tell for the overall market is a good tell for Goldman. It does appear that the Goldman is highly correlated to the broad market, but if we examine the visible divergences, last april and last september, we see that when the market does one thing and goldman does another, it is goldman that plays catch up. If we trust the chart, then if goldman goes up while the market goes down, sell your goldman, because it will follow the indicies south.