But there’s another key indicator that is also flashing a red warning sign: insider selling.
Insiders are officers, directors and the largest shareholders of corporations. It is critical to follow whether insiders are buying or selling their company’s stock; it could be an indication that they expect to see their company’s stock rise or fall in price.
When insiders are buying, investors usually think it is time to buy. When insiders are selling, it could mean something is up, and so investors might consider selling.
Argus Research has posted some alarming numbers from their corporate insider key indicator concerning the overall market, to which investors should pay attention. Their ratio showed that insiders are selling their shares at a pace not seen since July 2011. If you remember, dear reader, the market proceeded to fall dramatically in August, September and October of 2011.
Their key indicator, the corporate insider sell-to-buy ratio, stood at 5.77-to-1, which means that, for every 100 shares corporate insiders bought, 577 shares were sold by insiders of the company for which they work. If companies listed on the New York Stock Exchange are taken in isolation, this key indicator gets worse…8.2-to-1.
To put some perspective on this key indicator, in November of 2011, before the over 25% market rally began, the sell-to-buy ratio stood at 0.81-to-1, which means that, for every 100 shares insiders bought, only 81 shares were sold.
The recent corporate insider selling was confirmed by Trim Tabs Research. Their key indicator showed that insider selling for the month of January was five times insider buying, which, has thus far—for the month of February—increased at an alarming 15 times. For their key indicator, the interpretation is that, in the January market rally, for every 100 shares bought by insiders, 500 shares were sold. From February 1 to 13, the selling is accelerating rapidly: for every 100 shares bought, 1,500 shares were sold.
Insider selling, in isolation, cannot be the sole key indicator on which a buy-or-sell recommendation can be made. These numbers confirm the bear market trap that is currently playing itself out with this market rally. It seems that, while a few people were buying in January’s market rally (as evidenced by very low trading money), the smart money (corporate insiders) were selling into this market rally. Sounds like the smart money is the one to heed, dear reader.
Michael’s Personal Notes:
I was very confident … read more on : http://www.profitconfidential.com/
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