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March 6, 2012, 12:01 a.m. EST
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By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) "” Corporate insiders continue to sell shares of their companies at a well-above-average pace.
In fact, they are behaving even more bearishly than one month ago. And that's really saying something, since "” as I reported then "” their pace of selling in early February was the highest since last July, right before the bottom dropped out of the market. ( Read my Feb. 9 column .)
/quotes/zigman/627449 DJIA 12,962.81, -14.76, -0.11%
So far, at least, the market has escaped the fate that beset it last August and September. But it hasn't rallied very much either. Over the last month, for example, the Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.11% has only gained about a half of one percent.
Going forward, the market must now contend with insider behavior that is even more lopsided to the sell side. We have to go back nearly a year "” to the weeks leading up to the late April 2011 stock market top "” to find another period in which insiders were as bearish as they are now.
Consider a ratio of the number of shares that insiders have sold to the number that they have bought. In the week ending last Friday, according to the Vickers Weekly Insider Report, published by Argus Research, this sell-to-buy ratio stood at 6.56-to-1. A month ago, in contrast, it was 5.77-to-1.
As Vickers editor David Coleman writes: "We have not seen such a consistent number of sales reported by insiders since May 2011, with overall selling elevated for five consecutive weeks now. When this last happened, a correction came a callin'."
Click to Play $(function () { $("#video_750D62BC-6493-4DA1-BF56-FBD78E10D174").click(function (e) { e.preventDefault(); MarketWatch.Video.loadAndStartVideo('750D62BC-6493-4DA1-BF56-FBD78E10D174', 'video_750D62BC-6493-4DA1-BF56-FBD78E10D174', '287', '162'); }); }); Why insiders are skeptical of rallyAre you buying this rally? Insiders aren't "” many believe the rally will be short-lived. Photo: Associated Press.
Another way of putting recent insider behavior in context is to compare it to the sell-to-buy ratio in the weeks leading up to the market bottom early last October. In a couple of those weeks, that ratio dropped well below one. The Dow is some 25% higher today than then.
I concluded my month-ago column about insiders by writing that the next big move in the market is more likely to be down than up. The insider data support this conclusion even more strongly today than then.
To be sure, the insiders aren't always right about the market's near-term direction. They were far too bullish at the top of the bull market in 2007, for example. But more often than not they turn out to be right, which makes sense given their access to inside information and insight.
Bulls, take note.
Click here to learn more about the Hulbert Financial Digest.
/quotes/zigman/627449 Add DJIA to portfolio DJIA Dow Jones Industrial Average 12,962.81 -14.76 -0.11% Volume: 108.63M March 5, 2012 4:30p var embeddedchart70394702Chart = new EmbeddedChart('#embeddedchart70394702', NormalChartStyleNoDecimals, 240, 80, '1dy', '5mi', null, null, null, 'US:DJIA'); jQuery.data($('#embeddedchart70394702').get(0), 'embeddedchart', embeddedchart70394702Chart); //$(document).ready(function() { var storywidth = $('#mainstory').width(); var maxwidth = storywidth; $('#maincontent pre').each(function (index, value) { var thiswidth = $(value).width(); if (thiswidth > maxwidth) maxwidth = thiswidth; }); var offset = maxwidth - storywidth; if (offset > 0) { var margin = 13; var blanketwidth = $('#blanket').width(); var contentwidth = $('#maincontent').width(); $('#blanket').width(blanketwidth + offset + margin); $('#maincontent').width(contentwidth + offset + margin); $('#mainstory').width(storywidth + offset + margin); } //});Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
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About Mark Hulbert RSS News feedMark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD... Expand
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now. Collapse
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WSJ WSJ MarketWatch MarketWatch Facebook Twitter Barron's Barron's SmartMoney SmartMoney AllThingsDigital AllThingsDigital FINS FINS More BigCharts Virtual Stock Exchange Financial News WSJ Asia WSJ India WSJ China chinese edition WSJ Japan japanese edition WSJ Europe WSJ Deutschland WSJ Americas en Español em Português WSJ Radio WSJ Wine SEARCH 6:00 AM EST March 6, 2012 /marketstate/country/us New York Closed /marketstate/country/uk London Open /marketstate/country/jp Tokyo Closed /marketstate/country/us /marketstate/country/uk /marketstate/country/jp View All Latest News /news/latest 5:26aEurope stocks extend losses after IIF report
5:26aResources, banks pressure U.K.'s FTSE 100
5:19aEuro-zone 4th-quarter GDP unrevised at 0.3% fall
5:06aEx-Iceland PM denies financial-crisis charge: rpts
5:04aCEO says Ford won't back off R&D spending
4:58aIIF warns of massive Greek default fallout: report
4:19aBritish regulators weigh Libor overhaul: report
4:16aBanks, miners weigh on Europe stocks
4:03aAsian stocks move solidly lower
3:39aApple price target raised to $710-share at BarCap
3:24aEurope stocks open lower, Peugeot off, RWE up
3:07aGerman DAX 30 index down 0.5% to 6,828.53
3:06aRWE up 3.9% after results, outlook
3:06aPeugeot down over 5% on reported capital increase
3:01aFrench CAC 40 index down 0.5% to 3,471.31
3:01aFTSE 100 index down 0.4% to 5,854.23
3:00aStoxx Europe 600 index down 0.3% at 264.82
2:47aRussian stocks off 1.3% after protests, arrests
2:31aUpdates, advisories and surprises
2:30aTullett Prebon 2011 net off 18%, revenue flat
Loading more headlines... dow /quotes/zigman/627449 12,962.81 -14.76 -0.11% nasdaq /quotes/zigman/123127 2,950.48 -25.71 -0.86% s&p 500 /quotes/zigman/3870025 1,364.33 -5.30 -0.39% Kiosk 1330992300000 1331079000000The Trading Deck
Kevin Marder Pluses and minuses to a pullback It may not be the worst thing in the world to see the averages pull back. "¢ What to know before buying on a pullback /conga/kiosk/trading-deck-8.html 195951 1317986400000 1318053600000Commentary
Howard Gold Hot spring ahead for gas prices Continued high gasoline prices could derail the economic recovery. /conga/kiosk/commentary2.html 195916 1325066400000 1325118300000Radio
Charging for news online Another newspaper goes behind the paywall. Paying to read a newspaper online is something we all might have to get used to. /conga/kiosk/wildcard1.html 195907 1240934400000 12409344000002012 Tax Guide
Good luck with tax strategy If you thought doing your tax return this year was tough, wait till you try to plan money-saving tax strategies for next year. It's next to impossible. /conga/kiosk/taxes.html 195712 1330992300000 1331079000000The Trading Deck
meena krishnamsetty 2 media stocks insiders are buying Tracking insider purchases are a terrific way to get a window into the thoughts of those who are "in the know." /conga/kiosk/trading-deck-5.html 195949 MarketWatch.com Site Index Topics Help Feedback Newsroom Roster Media Archive Premium Products Mobile Company InfoSo far, at least, the market has escaped the fate that beset it last August and September. But it hasn't rallied very much either. Over the last month, for example, the Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.11% has only gained about a half of one percent.
Going forward, the market must now contend with insider behavior that is even more lopsided to the sell side. We have to go back nearly a year "” to the weeks leading up to the late April 2011 stock market top "” to find another period in which insiders were as bearish as they are now.
Consider a ratio of the number of shares that insiders have sold to the number that they have bought. In the week ending last Friday, according to the Vickers Weekly Insider Report, published by Argus Research, this sell-to-buy ratio stood at 6.56-to-1. A month ago, in contrast, it was 5.77-to-1.
As Vickers editor David Coleman writes: "We have not seen such a consistent number of sales reported by insiders since May 2011, with overall selling elevated for five consecutive weeks now. When this last happened, a correction came a callin'."
Are you buying this rally? Insiders aren't "” many believe the rally will be short-lived. Photo: Associated Press.
Another way of putting recent insider behavior in context is to compare it to the sell-to-buy ratio in the weeks leading up to the market bottom early last October. In a couple of those weeks, that ratio dropped well below one. The Dow is some 25% higher today than then.
I concluded my month-ago column about insiders by writing that the next big move in the market is more likely to be down than up. The insider data support this conclusion even more strongly today than then.
To be sure, the insiders aren't always right about the market's near-term direction. They were far too bullish at the top of the bull market in 2007, for example. But more often than not they turn out to be right, which makes sense given their access to inside information and insight.
Bulls, take note.
Click here to learn more about the Hulbert Financial Digest.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Asian stocks move solidly lower
Insiders as bearish now as last April
Is China raising a red flag?
Apple price target raised to $710-share at BarCap
4 big myths about Wall Street bonuses
Economic policy is hurting the economy
Insiders as bearish now as last April
Ben Bernanke's gas pump bump
Is China raising a red flag?
Asia Week Ahead: Investors Eye Aussie Data, NPC
What Romney, Obama Tax Plans Might Mean for You
The Big Themes From Mobile World Congress
Market of Steel
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD... Expand
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of hundreds of investment advisors. The HFD became a service of MarketWatch in April 2002. In addition to being a Senior Columnist for MarketWatch, Hulbert writes a monthly column for Barron's.com and a column on investment strategies for the Journal of the American Association of Individual Investors. A frequent guest on television and radio shows, you may have seen Hulbert on CNBC, Wall Street Week, or ABC's World News This Morning. Most recently, Dow Jones and MarketWatch launched a new weekly newsletter based on Hulbert's research, entitled Hulbert on Markets: What's Working Now. Collapse
Home Economics
Short sales may be better for home buyers
Life Savings
Why investors should trade more
Writing on the Wall
4 big myths about Wall Street bonuses
Tech Tales
Read Full Article »