INIDER SELLING SOARS 77% TO NEW HIGHS. BUYING STILL NON-EXISTENT.
The negative trends in insider selling and buying continue to worsen as insiders continue to give the ultimate vote of no confidence in their own future share price performance. Insiders sold $834MM in stock in the last week ending 9/18/09. That was a 77% jump from the prior weeks reading of $471MM. More alarming is the non-existence of insider buying. For the latest week insiders purchased just $21.9MM in stock. As we’ve mentioned previously, insiders sell stock for a varying number of reasons, but generally only purchase stock for one reason – they believe the stock will rise in the future. As of now, it’s safe to say that insiders aren’t confident enough to put their personal fortunes behind their own firms – a trend we’re also seeing in terms of corporate buybacks. This has to make one wonder just how strong the recovery is in terms of corporate earnings. While the stimulus based recovery may appear strong on the surface, the long-term sustainability is certainly being questioned by those on the inside….
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This says it all – if this is the “new” bull market, why would everyone be selling. Money talks – BS walks.
Do you have a 10-year chart?
TPC, a few months ago you had an article (sorry I forgot what’s it about in detail) that discussed that based on some indicator or historical data the stock market was due for an intermediate term correction around July. But when it doesn’t occur and instead continues higher for few months then an even larger correction occurs. The market seems to be getting to the point that buyers are so bold that they aren’t expecting an correction of more than 2 to 5% anymore. I’m not expecting a bear market is near but could believe something similar to March 2007 could occur sometime in the 4th quarter.
Jimmy,
Was it one of these?
http://pragcap.com/another-china-stock-bubble
http://pragcap.com/analyzing-the-morgan-stanely-sell-call
MS,
No 10 year chart. Sorry.
Insiders – taken in aggregate – paint a vivid picture. Insiders see the daily sales, they see the forecast, they see the trends. Any one insider or small group may or may not mean anything. However, if you take them in aggregate form I would think this has significant meaning.
TPC, both wasn’t it. I now remembered the article mentioned one example was the market didn’t correct in mid July 1987 but continue higher into October before the Black Monday crash occurred. The article showed example years of the corrections that did occurred in around mid July and a few of those that didn’t continued higher for few months and then plunged down. 2008 may had also been one of the examples. Thanks!
TPC, insiders have been selling in mass since April haven’t they?
James, yes they have. But you have to keep in mind that insiders don’t make short-term trades so this is not a good short-term indicator. Insiders purchase with the intent of holding for years and their contracts generally dictate it as such. Therefore, you have to wonder how confident insiders feel about the long-term sustainability of the recovery based on their lack of purchases. I would say insiders aren’t buying the idea of a long and sustained recovery….
found it.
http://pragcap.com/mind-the-gap
Jimmy, I still wouldn’t feel comfortable getting heavily short this market despite what the research says….Anyone calling for a crash is likely to experience more pain in the coming months as the short squeezes continue.
Thanks TPC, I have no ideas of going heavy short anytime. Been mainly modestly long since mid May (was over-leveraged long from early March to early May) so been sitting happy but perplexed of the lack of selling in past months. Not expecting a crash but won’t be surprised if the market gets a quick 5 to 10% correction sometime in the 4th quarter because not many seem to be expecting a decent correction anymore. Bears and shorts have pretty much given up and battered.
Maybe they are selling ahead of tax increases or letting the Bush tax cuts expire.
Market light goes from green to yellow.
http://www.freerepublic.com/focus/news/2334556/posts
“Biderman has measured the ratio of insider selling to buying since 2004, and says historically the ratio is 7 to 1. (Insiders almost always sell more than they buy because they receive stock as part of their compensation.) Right now the ratio is 30, one of the highest he’s recorded. November 2007 is the last time the ratio even came close, at 24.
The big rise in insider selling, which developed over the past several weeks, signals a time for caution, not panic, says Jonathan Moreland, analyst at InsiderInsights, a stock-market advisory service. “The insiders are telling me, O.K., there’s a yellow light now; the green light is off,” he says.”
I think it’s a clear vote by corporate insiders, that the sustainability of the economic recovery is very much in doubt….