Insider Selling Increasing Dramatically

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JAG's picture
JAG
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Joined: Oct 26 2008
Posts: 2492
Insider Selling Increasing Dramatically

According to information at www.sentimentrader.com and also www.insiderscore.com, corporate insider (aka the smart money) selling has reached a significant level. When the insider selling has reached this level in the past, the average 3 month return in the S&P 500 was greater than -11%, with a drawdown of greater than -15%.

Bottomline: The "smart money" is getting out, and the "dumb money" is getting increasingly bullish. I wonder what this means for the current rally?

mpelchat's picture
mpelchat
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Joined: Sep 10 2008
Posts: 214
Re: Insider Selling Increasing Dramatically

Assuming the information is correct, I have some belief that it is true, than:

"Fools and there money are soon parted."

This seems to be another facet of the looting.  I believe we (the CM community) all kinda understood that when when you pump a lot of money in the system it would make things look better, but it was only a short term fix since it was not sustainable.  However many people want to believe maybe even need to beleive that the economy will return to what it was once that they will even put there last dollar out in that belief.  So the "smart people" get the "others" to by the asset and make some money, getting out with this type of market bounce.  In the end, the "others" money will be parted from them.

 

cmartenson's picture
cmartenson
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Posts: 5972
Re: Insider Selling Increasing Dramatically

Who is doing the buying then one wonders?

It isn't "retail investors" as the mutual fund money flows make clear:

 

Mutual_Fund_Money_flows_Feb_09.jpg

 

Minus $35 billion in 2008  and already at -$16 billion in 2009 which is bad since January is one of the strongest inflow months of the year.

It all seems a bit fishy to me that there is all this renewed and sustained interest in buying into the stock market right now, but it is what it is and we'll need to keep an eye on it...I am just not quite there yet in thinking that the bottom is in and that the new cash injected into the economy is getting ready to do its thing.

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: Insider Selling Increasing Dramatically

 

Dr. Martenson,

This rally didn't really start until almost mid-march, so possibly the mutual fund money flow data has yet to show the associated inflows. Money flow into the "bullish" Rydex funds has hit an extreme in April so far, with the more "riskier" internet and electronics funds showing the largest spike in inflows.

A lot of the sentiment data would suggest that this rally should be coming to an end soon, or at least a prolonged sideways pattern, but I can't help to think that these same conditions were present in April 03, and the market rose despite of them. I hope April of 09 doesn't turn out like April 03, or I'm going to look like a fool again. Oh well, its better to be a well prepared fool, than an unprepared member of the herd.

Aaron M's picture
Aaron M
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Joined: Oct 22 2008
Posts: 2373
Re: Insider Selling Increasing Dramatically

Is there some form of adjustment being made to offset the losses and stabilize the market values?
For example the DOW - it's composite value is up - how is that possible?
A Wall Street version of Hedonics or something?

It's really hard to believe that our product can be down sharply, consumption swollen and growing and composite indices are showing elevated overall values in American business.
Perhaps I'm missing something?

Thanks in advance,

Aaron

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: Insider Selling Increasing Dramatically

Aaron,

I think the stock market is really just a voting machine for what people might fear or hope for, and doesn't inherently have any short-term correlation to the news, economic fundamentals, or any other exogenous events. The recent rebound is really just a natural manifestation of the bipolar nature of herd psychology.

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