Tags: Hulbert | insider | sales | ill

Hulbert: Corporate Insider Sales Bode Ill for Stock Market

By Dan Weil   |   Thursday, 12 Jul 2012 07:34 AM

The stock market, which has dropped for five straight days amid concern about earnings, has something else to worry about – stock sales by corporate insiders, says investment guru Mark Hulbert.

According Vickers Weekly Insider Report, the ratio of corporate insiders selling their company’s shares to those buying registered 5.5-to-1 for the week ended last Friday, he writes on MarketWatch.com.

That’s the highest level since the stock market’s peak in early May, when the ratio hit 5.71-to-1.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

The average level over the last 40 years rests between 2-to-1 and 2.5-to-1. A reading above that level is considered bearish for the market and one below is seen as bullish.

“That means that the insiders, who presumably know more about their companies' prospects than do the rest of us, are betting that stocks have gotten as far ahead of themselves now as they were at the bull market’s high,” Hulbert writes.

The ratio has climbed steadily after dropping to a low of 1.63-to-1 in mid-May.

To be sure, the move doesn’t indicate that the three-year bull market is over, Hulbert says. But a correction of 9 percent or so may be in order.

Blackstone Group executive Byron Wien remains optimistic, predicting the Standard & Poor’s 500 Index will reach at least 1,400 this year, up 4 percent from recent levels.

“When everybody is so negative, it’s usually a good time to take the other side,” he tells Bloomberg.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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