The recovery is supposed to be under way, right? But insider sales are at levels not seen in almost 2 years, which suggests there's still a bear out there.
A few tidbits of good economic data and generally better-than-expected profit reports have heated up the market once again on speculation the worst is really over.
Company insiders may be telling us the opposite.
While investors have lifted stocks even higher off the March lows, insiders have been quietly selling lots of shares of their own companies into the strength in the past month.
Ominously, insider sales now stand at levels not seen since late 2007, right before the current bear market began. And history shows that insiders are worth paying attention to, because they're the ones on the front lines.
The good news is that inside selling hasn't yet reached levels that portend a prolonged bear market. Instead, they could be signaling pullbacks that give you a chance to put money into stocks at lower prices.
But several sectors do appear destined for serious trouble, including consumer-oriented stocks and technology. Specifically, negative trends combined with insider selling suggest to me that First Solar (FSLR, news, msgs), J.M. Smucker (SJM, news, msgs), Moody's (MCO, news, msgs), Pulte Homes (PHM, news, msgs), Riverbed Technology (RVBD, news, msgs), CKE Restaurants (CKR, news, msgs) and Texas Roadhouse (TXRH, news, msgs) are particularly vulnerable. The inside story First, here's the big picture:
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Does this mean you should sell all your stocks and hide? Not necessarily. Insiders -- company executives and huge stockholders close to them -- don't always get it right, and market timing is tricky. If you are a long-term investor, it's probably better to wait out near-term turbulence.
The markets could resolve this insider bearishness by moving sideways for a while or with small and temporary corrections, says Michael Painchaud of Market Profile Theorems. We've seen few significant down days, offering better prices, during this summer rally. "Now you may have that opportunity," Painchaud says.
But he says several sectors are now look particularly vulnerable to bigger corrections. They include consumer discretionary stocks, technology, media stocks, software services, semiconductors, industrial products, business services and construction.
Top insider sales since June 15*CompanyInsider/role Sale timing Sale price** Amount sold Insider score***Stock decline****
First South Bancorp (FSBK, news, msgs)
Thomas Vann, CEO
Late July
$13.00
$266,140
99
26.6%
Alamo Group (ALG, news, msgs)
Ronald Robinson, CEO
June-July
$11.00
$316,315
98
31.2%
Cytokinetics (CYTK, news, msgs)
James Sabry, officer, director
Late June
$2.99
$113,928
98
14.5%
PrivateBancorp (PVTB, news, msgs)
Ralph Mandell, chairman
Late June
$22.00
$322,783
97
34.9%
Liquidity Services (LQDT, news, msgs)
Jaime Mateus-Tique, president
June-July
$10.50
$944,041
96
30.9%
Shutterfly (SFLY, news, msgs)
Douglas Galen, officer
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