Tags: Corporate | insiders | selling | downturn

CNNMoney: Downturn Coming as Corporate Insiders Are Selling

By Michael Kling   |   Friday, 08 Feb 2013 12:27 PM

Corporate insiders have advice for retail investors: sell.

Insiders were nine times more likely to sell shares of their company stock than they were to buy their company stock, the highest level of insider selling since last March, CNNMoney reported, citing data from Argus Research.

At the same time, small investors are sending large sums back into the stock market. Individual investors put $17 billion into stocks so far this year, after pulling over $150 billion out last year.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

“In the past, this level of insider selling has been indicative of a coming downturn or at least a plateau in the market,” stated David Coleman, insider trading analyst at Argus Research, according to CNNMoney.

The Commodity Futures Trading Commission’s Commitment of Traders report last week showed a marked shift from bearish to bullish sentiment, CNNMoney reports. The percentage of bullish traders has jumped from 37 percent to 55 percent within two months.

That shift may point to a coming stock market plateau or drop, Ari Wald, a technical strategist, told CNNMoney. “It usually means that a lot of bullish bets have already been in place. It doesn’t mean the market will fall apart but it looks like time to take a more neutral approach.”

Some experts predict a strong year for stocks, regardless of the recent spate of insider selling.

Jeremy Siegel, a finance professor at the Wharton School of Business at the University of Pennsylvania, told USA Today the Dow Jones Industrial Average will reach 15,000 or higher by the end of the year.

“This is just the beginning. I think this is going to be a 20 percent-plus year for stocks.”

With the 10-year Treasury yielding about 2 percent, investors seeking decent returns have few alternatives to stocks, Siegal argued.

Yet recent stock gains may worry investors. The Dow has previously faltered after passing 14,000, a level that has acted as a ceiling.

“We are back to levels where the market has had trouble sustaining highs in the past,” Richard Moroney, editor of Dow Theory Forecasts newsletter, told USA Today.

The Dow will probably remain around 14,000 most of the year, predicted Jeff Kleintop, chief market strategist at LPL Financial, according to USA Today.

“Whenever we get to these big milestones,” said Kleintop, “it seems to take the market a better part of a year to digest those gains.”

Therefore, expect volatility as companies release falling earnings estimates and Germany faces important elections this fall, he added.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

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