February 13, 2012 - Guess Who's Unloading Stocks Like There's No Tomorrow - By Elliott Wave International
Corporate insiders choose to sell their shares for many reasons. But one of those reasons is not because they believe the share price will go up.
With that in mind, consider that corporate insiders have recently been selling at a furious pace.
". . . insiders are now selling their companies' stock at a rate not seen since late last July.
"That's a scary parallel indeed, since that late-July spike in selling came just days before one of the more painful two-week periods in the stock market in years." Marketwatch, February 9
As you may recall, the Dow Industrials lost some two-thousand points in the July/August declines last year.
Yet even as insiders dump their shares, bullish sentiment is raging. The cover of Barron's that says "Dow 15,000" is just one example of market optimism -- there are many more. Survey data also reflects a bullish outlook.
". . . the percentage of bulls in the American Association of Individual Investors poll of retail investors hit 51.5% yesterday, the first majority reading since many speculative issues and indexes peaked last February. This is a critical threshold for this particular cohort of investors, as it is traditionally a cautious group." Short Term Update, February 10
That same Update noted a similarly bullish majority in a recent Investors Intelligence survey of investment advisors.
In the March 2011 Elliott Wave Theorist, Robert Prechter discussed increased insider selling by way of contrast with other optimistic investor groups:
". . . with whom do you want to bet: all the groups whose one-sided opinions are usually wrong or one group that more often gets it right?"
The Marketwatch article noted above also says that the Vickers Weekly Insider Report "is so alarmed by recent insider trends that this week it is selling big chunks of its two model portfolios and putting the proceeds in cash."
Is cash the place to be . . . or is "Dow 15,000" just around the corner?
Well, we do know that the S&P 500 has doubled since March 2009. You may remember, that's when we did call for a rally. Moreover, that's when we did say that the then-pervasive fear would be forgotten by the rally's peak.
Now, we're calling for something entirely different...something the majority does not expect.
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