Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15
Limits to Economic Growth - Challenge and Choices - 22nd Nov 15
Long Dollar Trade and Current Copper Price Below Cost of Production - 22nd Nov 15
UK Housing Market House Prices Affordability Crisis - Video - 21st Nov 15
The Fed Has Set the Stage for a Stock Market Crash - 21st Nov 15
Stock Market Primary V Wave Continues - 21st Nov 15
Gold And Silver - Value Of Knowing The Trend - 21st Nov 15
UK Footsie Bulls Set To Foot The Bill - 21st Nov 15
UK Housing Market Affordability, House Prices Momentum and Trend Forecast - 21st Nov 15
GDX Gold Miners’ Strong Q3 Results - 20th Nov 15
End of Schengen, Stock Market’s Technical Strength Grows - 20th Nov 15
Justice for All and The Curious Case of Zambia - 20th Nov 15
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe - 20th Nov 15
Silver Prices and The Management of Perception - 20th Nov 15
Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - 20th Nov 15
Waiting for Goldot Again - 20th Nov 15
Michael Curran Goes Down-Market Shopping for Gold Stock Winners - 20th Nov 15
Why Isn’t This Incredibly Bearish Bond Market Development Making the News? - 19th Nov 15
SPX Appears to have Stopped its Rally - 19th Nov 15
The Great Fall Of China Started At Least 4 Years Ago - 19th Nov 15
Using Elliott Waves: As Simple As A-B-C - 19th Nov 15
Has Deflation Been Ddefeated? - 19th Nov 15
Dow Jones Stock Market Index is Not Going to Crash - 19th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

Stock Market Insiders Head For the Exits, Do They Know Something "We" Don't Know?

Stock-Markets / Stock Markets 2013 Feb 08, 2013 - 02:44 PM GMT

By: Money_Morning


Keith Fitz-Gerald writes: Whenever the markets begin to look toppy like they do now, I turn to short-term indicators to help me figure out "what's next" for the markets. It complements the fundamental analysis I rely on for the big picture.

Some people - lots of people, in fact - will tell you that this is a wasted exercise. Predicting the markets, they say, can't be done. I disagree if for no other reason that if that were true, guys like Jim Rogers, Warren Buffett, Steve Jobs, Richard Branson and Carlos Slim wouldn't be the legends they are today.

As I see it, learning to "read" the markets and anticipate its twists and turns is absolutely possible.

But let me qualify my statement. My goal is not necessarily to be "right."

Any savvy trader will tell you the objective is to get enough of a read - right or wrong -so that you can use the appropriate tactics needed to be profitable.

For example, the markets have one heckuva run and flirted with new highs in recent trading. To the casual investor, it appears that things are good because the economy is gradually recovering.
Yet, there have been nine insider sales for every single buyer among NYSE stocks in the past week, according to the Vickers Weekly Insider Report as reported by CNBC.

Clearly something doesn't match up, especially when you consider that the last time insiders sold this aggressively was in early 2012, right before the S&P 500 took a 10% header.

As my colleague, Bill Patalon, noted recently in his Private Briefing column, there are all kinds of legitimate reasons insiders sell their shares. They range from simply taking profits to portfolio reallocations, estate planning, raising cash to pay the ginormous taxes that come with success, even financing dream homes. So there could be something else at work here. But I don't think so.

What concerns me is that insiders, particularly when you're talking about senior management types, typically know a lot more than the average investor. Further, they tend to have a consistent view of very specific longer term market conditions and, more importantly, its earnings potential.

They are, as Enis Taner of noted to CNBC, "usually right over a long period of time."

What Insiders Sales Say About the Market
My take is that the insiders are spot on. I also believe that the fact that they've chosen to sell aggressively right now suggests a looming correction is in the works. Here's why:

■The markets have run higher against a backdrop of seriously flawed fundamental data, incessant Federal meddling, political disarray and a complete lack of supervision on Wall Street.
■Insiders are taking profits at a time when the rate of earnings growth is declining and forward-looking forecasts have been dropped to almost laughable levels. They - the insiders - are well aware of not only market uncertainty, but corporate insecurity in the months ahead.
■Markets tend to take a while to digest their gains after each run higher. Since 2009, for instance, the markets have taken nearly 12 months to consolidate after every 1,000 point run before moving higher. This means that there will plenty of dips, twists and turns that will test investor resolve. Because the markets have an upside bias over time, most corrections, reversals and complete breakdowns generally turn out to be tremendous buying opportunities - a fact that will be lost on most investors who panic if a rollover gets started in earnest.

Figure 1: Fitz-Gerald Research Publications,

■We have not seen the kind of "blow-off" action yet that has accompanied major market reversal points in the past, most notably those in 2000, 2003, 2007, and 2009. So I want to be on guard against the possibility if trading becomes frothy.
With that in mind, here are my key takeaways:
■Market history shows that insiders tend to sell holdings shortly before market tops or short-term corrections. Generally speaking, the more aggressive the sales, the more serious the following correction.
■A 9-to-1 selling ratio is significant because it resembles extremes associated with other major market turning points in recent history.
■While not a fait accompli, investors should tread lightly under the circumstances. They should also take appropriate action to ensure their portfolios are not ravaged if a substantial correction does, in fact, materialize. Examples include tightening up trailing stops, purchasing put options, going "long" volatility or buying specialized inverse funds - all of which can take the sting out of a sudden reversal while also preserving upside and income.

My fear is that we've already reached the point where there is so much money sloshing around that the next "big thing" from Team Fed may actually be the straw that breaks the camel's back. But that's another story for another time.

Thank goodness protection is cheap at the moment. Assuming, of course, insiders know something "we" don't.

For more wisdom from Keith, check out How to Invest in 2013 Without Losing Your Shirt.

Source :

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History