Insider selling raises flags - Artigo do Peter Brimelow
Enviado: 24/8/2003 21:06Insider selling raises flags - Insiders say double or quits
By Peter Brimelow, CBS.MarketWatch.com
Last Update: 12:02 AM ET Aug. 18, 2003
NEW YORK (CBS.MW) -- Corporate insiders have been selling all summer, but the stock market hasn't fallen. Yet.
Michael Burke of Investors Intelligence puts this way last week:
"The current reading of the [insider] Sales/Purchase Ratio still shows heavy selling. It has moved up modestly but has exceeded the worst ever readings that were previously noted in 1986 and this is the eleventh bearish reading in a row.
"Insiders have taken advantage of the market rally to sell stock, not being convinced of further gains. This is very much the opposite of investment letter writers who are stubbornly maintaining their bullish stance, with recent readings showing the fewest bears since 1987."
I don't like references to 1987. I don't like anything suggesting another October '87 Crash.
The Insiders Sell/Buy Ratio is actually maintained by Vickers Weekly Insider. Currently, the eight-week smoothed reading is 3.5. For comparison, at the March market low, the eight-week average was up to 1.5.
Vickers reports that the one-week Sell/Buy Ratio has picked up a little, to 3.01. Normally, that would be a hopeful leading indicator. But, the service says apologetically, it thinks the one-week numbers have been skewed by reporting changes affecting multiple trades in a small number of companies. Adjusted for that, the one-week ratio would be over 5.
"Vaporizing," as Vickers says graphically, any apparent return of optimism.
The insider-selling indicator is tricky. It worked very nicely in the late spring of last year, presaging the lurch to the October low.
But insider selling also intensified the spring of this year. And the broad indices are now several percentage points higher.
The corporate insiders' response: double or quits. Unusually, they've continued selling right through the summer. That's what's taken the Sell/Buy Ratio to its current disturbing low.
Investors Intelligence's Burke has his own twist on the Sell/Buy Ratio: he thinks its impact is delayed a year.
As Mark Hulbert has pointed out, Burke used this twist to predict -- a year in advance -- last October's low and the subsequent strength, And, not for the first time, academic researchers have recently published a study confirming Burke's insight.
Burke has been expecting another low this summer, in the 7,400 range. But he says that his reading of the insider indicator is now neutral and turns bullish in September for a couple of months.
Looking ahead, Burke says the insider indicator turns "very bearish again" in April of 2004.
This does not mean, however, that Burke thinks we can relax for now. He worries about other indicators. He doesn't like the ongoing surge in buying climaxes.
And he says that fundamental valuations "suggest that the market is more expensive than it was in 1987 [there's that year again!] and 1929. [AAARGH!]"
Market-mangled veterans like Burke often have this wary attitude to their own indicators. For the record, Dow Theory Letters' Richard Russell now says that it may not mean much even if the market finally breaks 9,323 -- supposedly a Dow Theory Buy Signal -- today.
By Peter Brimelow, CBS.MarketWatch.com
Last Update: 12:02 AM ET Aug. 18, 2003
NEW YORK (CBS.MW) -- Corporate insiders have been selling all summer, but the stock market hasn't fallen. Yet.
Michael Burke of Investors Intelligence puts this way last week:
"The current reading of the [insider] Sales/Purchase Ratio still shows heavy selling. It has moved up modestly but has exceeded the worst ever readings that were previously noted in 1986 and this is the eleventh bearish reading in a row.
"Insiders have taken advantage of the market rally to sell stock, not being convinced of further gains. This is very much the opposite of investment letter writers who are stubbornly maintaining their bullish stance, with recent readings showing the fewest bears since 1987."
I don't like references to 1987. I don't like anything suggesting another October '87 Crash.
The Insiders Sell/Buy Ratio is actually maintained by Vickers Weekly Insider. Currently, the eight-week smoothed reading is 3.5. For comparison, at the March market low, the eight-week average was up to 1.5.
Vickers reports that the one-week Sell/Buy Ratio has picked up a little, to 3.01. Normally, that would be a hopeful leading indicator. But, the service says apologetically, it thinks the one-week numbers have been skewed by reporting changes affecting multiple trades in a small number of companies. Adjusted for that, the one-week ratio would be over 5.
"Vaporizing," as Vickers says graphically, any apparent return of optimism.
The insider-selling indicator is tricky. It worked very nicely in the late spring of last year, presaging the lurch to the October low.
But insider selling also intensified the spring of this year. And the broad indices are now several percentage points higher.
The corporate insiders' response: double or quits. Unusually, they've continued selling right through the summer. That's what's taken the Sell/Buy Ratio to its current disturbing low.
Investors Intelligence's Burke has his own twist on the Sell/Buy Ratio: he thinks its impact is delayed a year.
As Mark Hulbert has pointed out, Burke used this twist to predict -- a year in advance -- last October's low and the subsequent strength, And, not for the first time, academic researchers have recently published a study confirming Burke's insight.
Burke has been expecting another low this summer, in the 7,400 range. But he says that his reading of the insider indicator is now neutral and turns bullish in September for a couple of months.
Looking ahead, Burke says the insider indicator turns "very bearish again" in April of 2004.
This does not mean, however, that Burke thinks we can relax for now. He worries about other indicators. He doesn't like the ongoing surge in buying climaxes.
And he says that fundamental valuations "suggest that the market is more expensive than it was in 1987 [there's that year again!] and 1929. [AAARGH!]"
Market-mangled veterans like Burke often have this wary attitude to their own indicators. For the record, Dow Theory Letters' Richard Russell now says that it may not mean much even if the market finally breaks 9,323 -- supposedly a Dow Theory Buy Signal -- today.