The Business Insider, the financial world’s tabloid website, jumps on the Sotheby’s stock bandwagon with this post from Joe Weisenthal boldly warning that Sotheby’s 23% fall in stock price is a flashing warning that the economic cycle is about to rollover. Cooler heads prevail in the comments section where one sober observer who bothered to do a little research declares that the majority of the sharp declines in Sotheby’s stock preceded a rise, not a fall one month later:
Joe’s hypothesis is that a 22% difference in the stock over six weeks is a flashing indicator for the economy, but this is only true if the company stock keeps declining after a 22% fall. However, 22% price changes in six weeks are normal for this stock, regardless of the economy. I just downloaded the historical data and 1 out of every 5 days since the stock began trading publicly in 1988 has had a 22% change from the price six weeks prior, that seems pretty common.
I also checked to see for those periods where the price declined more than 22%. In only 43% of those cases was the stock actually lower one month later, only 48% of the time was it lower two months later, and only 56% of the time was it lower three months later. Even one year later, the stock was only lower 50% of the time. [emphasis added]
In other words, if Sotheby’s stock falls 22% over six weeks, there is about a 50-50 chance it will lead to a long-term decline in the shares.
Watch Out, the Infamous Sotheby’s Indicator is Flashing a Huge Red Flag (Business Insider)