Insiders have officially marked the top of the stock market: last week's insider selling of all stocks (not just S&P) hit an all time record of $4.5 billion. This is the biggest weekly number ever recorded by tracking company InsiderScore.com: as Sentiment Trader highlights no other week before had more than $2 billion in net selling.
Furthermore, selling in just S&P companies hit a whopping $2.8 billion: over 4 times more than the week prior! As such the ratio of insider selling to buying is now meaningless. Even Bloomberg, which traditionally just posts the data without providing commentary to it, highlighted this ridiculous outlier: "Insider selling at Standard & Poor’s 500 Index companies reached a record in the past week as executives took advantage of a two-year high in the stock-market to sell their shares."This behavior by insiders (mostly corporate executives) gives a pretty stark indication of where they think the market is headed next. It's hardly surprising, then, to see today's very weak market action. These insiders by definition know more than we do about their companies.
There are many reasons (tax planning, etc.) that would explain why insiders would be cashing in their stock options--especially in the latter part of the year--but this level of insider selling is staggering. It's especially remarkable when taken in tandem with this report, which indicates that small investor sentiment is at its most bullish point since January 2007. At the very least, insiders have decided that the risk of higher taxes is not outweighed by any potential rewards in the stock market over the next several months. That's worth noting.
When small investors disagree with insiders, it's not usually the retail investors who are right. Be careful out there...
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