IPO Trend Signals Danger

Large Changes in IPO Activity Is a Useful Leading Indicator of Market Direction

The study of IPO activity has proven to be a useful part of a set of tools we use to measure investment sentiment which is a key component in evaluating market risk.

The most reliable leading indicator of market direction is derived from the greatest amplitude of change (rising or falling), with major changes in IPO activity tending to precede the opposite behaviour in stock market indices.

IPO activity is currently demonstrating a dramatic surge in activity which supports our thesis of the past few months that markets currently present an unattractive risk/reward proposition.

We discussed our strategies for preserving profits on our investment positions and analysis of major stock, bond, and commodity markets in our April issue. We will update our view in the May issue to be published early next month.

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