Saturday, May 18, 12:00 noon.

I doubt we will ever again see an IPO handled as this one was.

Normally, public investors are pretty much locked out of getting stock at the pre-open offering price. Those shares are normally allotted to the largest clients of the investment banks handling the IPO, which means friends and family, mutual funds, hedge funds, major money-management firms, and very large individual investors.

And only after the stock begins trading is the public able to pile in, which normally immediately spikes the price up double-digits and the well-hyped stock is off to the races.

But apparently Mark Zuckerberg insisted that retail investors have access to a sizable portion of his Facebook offering at the pre-open offering price. And even non-profit charitable institutions were insisting on getting in. So the number of shares insiders were selling was increased significantly to provide additional shares for the public (and the offering price was increased to $38, the upper limit of the previously announced range).

There were so many shares made available to retail investors that the comment was made on CNBC that if investors didn’t get an allotment offer they should ask their broker why.

The result appeared to be that public investors who were interested were already in on the deal when the stock began trading.

So rather than the public rushing in to drive the price higher, the investment banks had the embarrassing situation of having to rush in with unintended buying themselves, just to prevent the price from dropping below the offering price when selling dominated the activity.

It was a costly mistake for the investment banks, and on one of the largest IPO’s in history. They’re not likely to make the same mistake on future IPO’s.

Retail investors can expect to be put back in their place, where their role is to let insiders, investment banks, and their biggest clients get positioned first, and then to rush in and excitedly drive the price higher for those fortunate folks.

Gold plunged an additional $45 an ounce the first three days of the week, and then spiked back up $55 an ounce the last two days, to close up $10 for the week.

Is it an upside reversal or just a bounce off the oversold condition?

As I warned when our technical indicators came off their October buy signal, the market goes down a lot faster than it goes up. So not waiting to re-position is more important when the market is overbought and at risk of a correction than when the indicators are pointing to a potential bottom. There’s usually more time to position on buy signals.

And indeed, the stock market has given back almost five months of gains in just three weeks. Those who took profits can expect to get back in and make some of the profits all over again, while those who hold on will need the next upmove just to hopefully get back to even.

Of course making and keeping profits from the upside by taking them, and then making more from downside positions is even better. But as I often say it’s not quite as much fun to make profits from downside positions when most everyone is experiencing losses, as it is in rising markets when everyone is happy. But it beats the alternative.

The substantial plunge of the last three weeks does have the market potentially oversold short-term. Will it result in a bounce off the oversold condition, or perhaps even be the end of the pullback? Or will it just keep going down as it did last summer, as circled in the chart? That’s what our work is all about.

To read my weekend newspaper column ‘This Is Crazy! Bring Back Glass Steagall!’ Click here.

Subscribers to Street Smart Report: In addition to the information in the premium content’ area of this morning’s blog, a hotline and the latest issue of the newsletter is in the subscribers’ area of the Street Smart Report website from Wednesday. But please stay tuned to the hotline in the meantime for more potential portfolio changes!

It was another day that started out positive but ended negative. The Dow was up 50 points early on, but gave up the gains to close down 73 points. Volume was higher than the recent norm, with 1.1 billion shares traded on the NYSE, but that can be attributed to the normal higher volume on options expirations days. 

The Dow closed down 73 points, or 0.6%. The S&P 500 closed down 0.7%. The NYSE Composite closed down 0.7%. The Nasdaq closed down 1.2%. The Nasdaq 100 closed down 1.2%. The Russell 2000 closed down 0.9%. The DJ Transportation Avg. closed down 1.3%. The DJ Utilities Avg closed unchanged.

Gold closed up $17 an ounce at 1,592.

Oil closed down $1.24 a barrel to $95.83 a barrel. ???????

The U.S. dollar etf UUP closed down 0.4%.

The U.S. Treasury bond etf TLT closed unchanged.

European markets closed down again. The London FTSE closed down 0.6%. The German DAX closed down 1.2%. And France’s CAC closed down 0.7%.

A negative week pretty much globally.

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Next week is a relative light week for potential market-moving economic reports, which include the Chicago Fed National Business Index, Existing Home Sales, Durable Goods Orders, and Consumer Sentiment.  To see the full list and times for each release click here, and look at the left side of the page it takes you to.

To read my weekend newspaper column ‘This Is Crazy! Bring Back Glass Steagall!’ Click here.

Subscribers to Street Smart Report: In addition to the information in the premium content’ area of this morning’s blog, a hotline and the latest issue of the newsletter is in the subscribers’ area of the Street Smart Report website from Wednesday. But please stay tuned to the hotline in the meantime for more potential portfolio changes!

I’ll be back with the next regular blog post on Tuesday morning at 9:25 a.m.

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