Fundamentally, when company insiders are buying up shares hand-over-fist, it's generally a good signal to join in on the buying activity. And when insiders are dumping shares, it's best to dump along with them:
Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.
Gap Inc.’s founding family sold $45 million of shares in the largest U.S. clothing retailer this month, according to Securities and Exchange Commission filings compiled by Bloomberg. Daniel Warmenhoven, the chief executive officer at NetApp Inc., liquidated the most stock of the storage-computer maker in more than six years. Sales by the co-founders of Bed Bath & Beyond Inc. were the highest since at least 2001.
While the Standard & Poor’s 500 Index climbed 26 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.
“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992.
Then there's this batch of macro-level bad news from David Rosenberg c/o Zero Hedge. Bottom line, Rosenberg says the announced reduction in automotive production, the lack of a bottom in the housing market, and the rise in the unemployment rate to 9%, then to 10% all points to the continued degradation of the U.S. economy.
Looking at some charts, the S&P still climbed this week, yet the ~875 resistance level is still holding, and the MACD is now showing negative momentum:
Looking at the $SPXA50 chart, we're at 11 days-and-counting with more than 400 of the S&P 500 trading above their 50-day moving average. When you're holding leveraged shorts like TZA and FAZ in a market like this, it's fraking annoying. And I know, I recently examined the interminable stretch (for the bulls, at least) when fewer than 100 stocks in the S&P 500 traded above their 50-day moving average for 48 trading days. In that post, I didn't even bother to point out the recent 15-trading-day period in February and March, when again, fewer than 100 S&P 500 stocks traded above their 50-day moving average. Let's just say I have some Obama-esque hope that the markets pull back next week. These bearish-case posts are getting to be a bit tedious, and repetitive.