“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.
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.” …”
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