GS as leading indicator?

Holy huge chart, shrink that brah.

Fundamentally there is no reason for them to advance, technically I have no idea for sure. Can you back test this same idea against the last few pullbacks (early 10, november-ish 09, august-ish 09, march 09)?

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But I think if there's a pattern at all, it would be more likely to occur now as opposed to in the past, since as of late, GS has been one of the major names with which the market's movements have been tied.

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IDK if I follow that. It sounds like data mining. Markets have been driven by financials for at least 3 years. ETA: But it is definitely still interesting how they peaked out at the same time. My question is, if/when they converge, is it a re-test for the market? Will we bounce up or will we bounce down?

See my eta. We view the market through different lenses. To me, GS was a market moving story for about a day or two. Important, and certainly headline generating/topical for longer, but not market-moving. Sovereign debt has been the pre-eminent market moving story in global markets for the entirety of 2010, and IMO, by a wide margin. We've had Greek rumblings since Lehman, but it really picked up steam at the end of 09, and it started really affecting the markets in January of this year (combined with the DubaiWorld stuff).

ETA: Sorry I completely missed the point of that. IMO, the sovereign debt issues and recovery slowdown are what is driving financials.

I get your point. But my point is more or less the same but instead I'm using GS as a substitute for "financials". So if sovereign debt/recovery slowdown is driving financials, is there an individual within the financial sector we can look to as a leading indicator?

I'm just throwing GS out there as being one financial we can pair against the market to make an educated guess as to future performance. Sure we can measure the Saints potential success based on their performance as a whole. We can also gauge that potential success by looking at Drew Brees' performance alone. By looking at the performance of the financial sector as a whole, we miss out on the individual intricacies within the group that could singly account for a large part of the whole group's performance.

Just as we can't gauge the Saints success on Brees' performance alone, we can't gauge the market's success on GS's performance alone. But given they are quite a large piece of the pie, we can gain some insight by measuring their individual qualities.

If the market is now priced fairly compared against GS, perhaps its priced fairly compared against financials, and perhaps its now priced fairly.

I have a friend who's an M.D. up in Chicago. Why I don't know because he's a hell of a trader, much more successful than myself. But he's also been doing it for about 30 more years. Anyway, he got me to thinking about it because for the past two weeks, between 8:30 and 9:00 he plots a 5-minute GS chart against a chart of the Dow and/or S&P to determine whether he's going to go long or short for the day. According to him, it's been working beautifully. There's a lot more to it than just looking at the charts, but he's a big fan of basing his big board trading patterns on how some of the biggest actors are performing, and I think there's some merit to that, although I haven't tried it out much for myself yet. Perhaps he reasons that since GS sees about 10 times the headlines per day than some of the smaller companies which would also be included in a financial index, if GS is doing well but the index as a whole isn't, throughout the day the index will have a tendency to sync itself with GS? According to him, GS has been turning before the general market has. Note that he's using a 5-minute chart, so we're talking about a matter of seconds here, but if he's on to something, perhaps it could be applied to a longer time frame as well.

The question that you alluded to is certainly still looming. If the market is priced accurately now, when will it no longer be priced accurately and in which direction will the resultant inaccuracy cause us to move next?

Just a random side note but several variables that drive profits for GS may be seen as negatives for the market as whole. Just think about volatility, consolidatiod and acquisitions during slowdowns due to depressed valuations, and GS's ability to hedge itself. Remeber that GS never had a trading day with losses Q110 while the major indexes experience significant volatility in both directions.

I agree with you on the volatility, especially if you consider the source of the volatility being outside the US and their dominance in FICC trading, which has been overwhelmingly their profit center since Lehman. I would be floored if they're not making money hand over fist right now, even by their standards. IDK about the slowdown in deal making though. Its not the main profit driver, but they're still obviously huge in IB dealmaking still.I don't see how a decline in deal making benefits them?

I did not notice that, in fact I was under the impression it was just the opposite. Are we talking about big mergers (multi-billion) or smaller ones? I've only noticed a bunch of failed (or dying) m&a recently. I'd love some examples as I may be unconsciously filtering out the ones that succeeded since they tend to be less sexy in my mind. I try to follow m&a pretty meticulously.