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The Insider Selling Question to Stock Market Trend

Stock-Markets / Stock Market Sentiment May 04, 2009 - 01:18 PM GMT

By: Richard_Shaw

Stock-Markets

The ratio of share sales to share purchases by US insiders shot way into bear territory at the height of the stock market rally in the US stock market during April.

The net sales spike was much higher than at any time in the past year.


As of late that ratio has fallen back into a neutral range.  How should that be read?  Did the insiders see buyers overpaying for their company shares?  Did the insiders want out while the getting out was good?  Did the insiders decide they themselves were wrong and then reduce selling as the rally continued? Did they reduce net selling, because they had satiated their desire to have less portfolio exposure to their own companies?

The spike phenomenon of insider selling was dramatic and counter rally, but short-lived.  We are forewarned by somewhat uncertain what to make of it, except to believe that if executives believed their companies were off to a new bull market, they would be buying, not selling.

We haven’t looked into it yet, but we suspect a large dose of the sellers were banking executives who are not wholly confident that investor enthusiasm for banks will persist in the near-term.

from Barron’s Market Lab

By Richard Shaw 
http://www.qvmgroup.com

Richard Shaw leads the QVM team as President of QVM Group. Richard has extensive investment industry experience including serving on the board of directors of two large investment management companies, including Aberdeen Asset Management (listed London Stock Exchange) and as a charter investor and director of Lending Tree ( download short professional profile ). He provides portfolio design and management services to individual and corporate clients. He also edits the QVM investment blog. His writings are generally republished by SeekingAlpha and Reuters and are linked to sites such as Kiplinger and Yahoo Finance and other sites. He is a 1970 graduate of Dartmouth College.

Copyright 2006-2009 by QVM Group LLC All rights reserved.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Do your own due diligence.

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