Goldman Sachs - Watch but don't buy yet

Complete Article and Graphs

 I am adding Goldman Sachs (GS) to my watch list but not pulling the buy trigger at this time.  There is a lot of uncertainty out there in the short term to expect to see a full recovery in the Financial Services and Banking sectors this year.  The current US political climate is gridlock so I do not have a handle on what will happen to governmental spending at all levels.  What will the tax rates be?  Will there be default in Europe?  Will price levels in China finally hit the bubble the rest of the world has seen?

These concerns being expressed let's look at the numbers.  First, the weekly price momentum vs the 20, 50 and 100 week moving averages over the past 2 1/2 years as seen in this chart provided by Barchart:

Also I've noticed short term strengthening in current numbers.

Barchart technical indicators:

• Barchart 20% short term technical sell signal is weakening
• Trend Spotter sell signal is also weakening
• At the present level the stock is trading below its 20, 50 and 100 day moving averages but getting stronger
• The stock has been up in 3 of the last 5 trading sessions and is up 7.75% in the last week
• The Relative Strength Index is 43.67% but climbing
• Barchart computes a technical support level at 111.07
• The stock recently traded at 114.75 which is below its 50 day moving average of 126.70

Summary:  Financial services conglomerates like Goldman Sachs (GS) will always be around in the long run but for the short term I see too much uncertainly to put my retirement funds at risk.  IPO activity isn't rosy, M&A activity is also waining.  US governmental spending and deficit reduction is gridlocked.  Income taxes for the future haven't been decided.  The Eurozone defaults are still looming and who knows what will happen in China.  I might add that in the past earnings predictability for Goldman Sachs has been very unreliable.  If the revenue and earnings projections plus a return to a better P/E ratio happened then investors could see a 12% - 18% annual total return over the next 5 years.  For me, I'll watch from the sidelines at the present, there is just too much risk here for me.

Jim Van Meerten is a Marketocracy Master