Hulbert: Insiders are Turning Bearish….

The last time Mark Hulbert updated his insider trading data the market was in the process of bottoming.  He said insiders were very bullish.  How quickly sentiment changes in a month!  His latest update shows a huge reversal in insider sentiment:

“For the week that ended last Friday, this sell-to-buy ratio for NYSE-listed shares listed stood at 6.67-to-1. That means insiders, on average, were selling nearly seven shares of their companies’ stock for every one that they were buying. One month ago, in contrast, the comparable ratio stood at 1.54-to-1.

To put the current sell-to-buy ratio into a broader perspective, consider where it stood on those occasions this year when the stock market hit a high or low of more than just minor significance.

 

Sell-to-buy ratio for NYSE-listed stocks
Early May high, just before May-June correction 7.11-to-1
Early October high, just before October-November correction 5.13-to-1
Latest week 6.67-to-1
Average over last 20 years 3.41-to-1
Early June low 2.01-to-1
Mid-November low 1.54-to-1

As you can see from the accompanying table, the latest reading is both far above the long-term average and right in line with levels seen at the market’s intermediate tops earlier this year.”

Read more here.

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Barak

    thetechnicaltake notes that this is the fastest move from depression to euphoria in over 20 years:
    http://www.thetechnicaltake.com/2012/12/23/investor-sentiment-this-for-certain/

  • http://www.dowtheoryinvestment.com Manuel Blay

    Good one. If we had the breakdown in order to know what corporate officers are doing, we could derive even stronger forecasting power. In any instance, such extreme figures are bearish.

  • Andy

    Clearly there is some value in looking at what insiders are doing but with the tax changes on short term and long term capital gains, it may just be selling to lock in long term gains with the lower rates. For some people with a lot of long term gains this makes perfect sense. So this period of time may be giving a false bearish signal

  • barak

    I would have agreed if it wasn’t for the other measures of sentiment euphoria we are witnessing. especially disturbing for me is the gap between falling Q4 and 2013 estimates and the market’s non response. to me this suggests Q4 earnings season might copy the last one.

  • Mr. Market

    There’s another pattern. Insider (massively) sold stocks before the early May high, before the October/November high and now when the stockmarket has gone higher.

    Indeed, very bearish but don’t forget the fiscal cliff with its massive dividend tax hike. No wonder, insiders sold.