Here's a Tip: Insiders Are Selling.

[bostonangler]

I think we should start with the chart of the Insider Sell/Buy Ratio, because it had a pretty big surge last week. Before you run out and liquidate your portfolio, let's take a closer look.

 

It is thought that insiders know more about what is going on at their company than those of us on Wall Street know, so it makes sense to pay attention when they get aggressive with buying or selling. But is their timing perfect? I don't have data to say, but my sense from having watched this for years is that this is rarely an indicator that is coincidental with the major indexes.

 

Sure, that spike up in early April makes them look smart, as does the plunge in mid-May, and throughout June. Even the November and December lows make them look pretty smart. But let's go back to July of 2018, the last time they were this aggressive on the sell side. They look smart in hindsight, but the S&P 500 did not tumble until October.

 

The S&P made a low in early July, as opposed to early June this year. If we look at the 10-day moving average of the number of stocks making new lows, we see it came down quite a bit during that July 2018 rally. In mid-July, it started rising and stuck with that trend until the December lows. Thus far, we have not seen a rise in this indicator, but I am watching it closely.

 

The number of stocks making new lows was contracting on that July rally, which is similar to now. The main difference is that the absolute number of new highs was far fewer last year than the peak readings we've seen this year. But trend-wise, it is similar.

 

I think when you look at the chart of the McClellan Summation Index, you can see why I fuss so much about it. Last summer, it peaked in June and the July rally was miniscule and was to a lower high. Even the late August rally was to a lower high. And look at September: That plunge as we headed into new highs for the S&P was not pretty.

 

And now? Well sure, we're working on a potential lower-high, but thus far the indicator continues to grind its way higher. A rollover from a lower high would be concerning.

 

The Citigroup Panic/Euphoria Model is also interesting because, while it bottomed in the spring of last year (not shown on the chart), it was on the rise in July, much the same way it is on the rise now (it is just over zero, so a bit more than neutral), but not yet at Euphoria.

 

It did tag Euphoria in early August and stayed there, climbing into Euphoria in early September, about a month before the S&P made its high.

 

 

Here's the really curious part: Both the Transports and the Russell 2000, the two huge laggards now, were up at new highs most of the summer as well. Neither of these two indexes started down until September.

 

 

And the S&P? What did it do? From the July low it rallied almost 10%. This is why we use indicators, and not the chart, to tell us what the market is up to. We are not looking to pin the exact high or the exact low, but to know when the S&P is living in its own world - with indicators not confirming -- and it's time to exit or enter the market. Last September the signs were all there.

 

As for our current market? We're now overbought. We have sentiment complacent. In fact the Daily Sentiment Index (DSI) for the S&P went back to 90 on Friday; Nasdaq went to 93. And the Volatility Index? That's now at 20. Please recall the put/call ratio for the VIX went to triple digits last week. My guess is we see a pick up in volatility in the next week or so.

 

 

 

 

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https://realmoney.thestreet.com/investing/stocks/here-s-a-tip-insiders-are-selling--15018645?puc=yahoo&cm_ven=YAHOO&yptr=yahoo

 

 

Insiders have drove stocks up with company buybacks... And now they are selling... Don't get caught holding the bag.

B/A

[Pitcher]

Any intelligent person knows to take some profits when we are at all time highs.  

[bostonangler]

3 minutes ago, Pitcher said:

Any intelligent person knows to take some profits when we are at all time highs.  

 

Yup, but these buybacks have propped up prices and mom and pops are going to get caught, because they don't book their profits they think this bull will run forever... I've seen it before...

 

B/A

[Pitcher]

You are correct.  The crooks in NY push the buy and hold strategy which will work over a 40-50 year period but if you sold the tops and bought back the lows you could quadruple your money in that same time, maybe more

[Pitcher]

People spend more time playing video games, watching TV or doing something else that is useless instead of learning market tendencies and keeping an eye on their money. My son has a 401k worth well over 150k and he refuses to touch it.  He’ll get what he gets in 25 years.  I hope he has enough to retire on. 

[bostonangler]

23 minutes ago, Pitcher said:

My son has a 401k worth well over 150k and he refuses to touch it.  

 

I had a boss in 2006-07 with over 100K in his. I kept telling to move his profits but he didn't. He lost more than half of it and he was forced into retirement about here years later. He never had a chance to get his money back...

 

B/A