Market Poised For Huge Crash, Insiders Selling Like Mad, Are You Being Played For A Sucker?

Posted by Adam English  on the Wealth Wire

Over the past five weeks the markets have surged. The Dow is over 14,000, the S&P 500 is over 1500 and the Nikkei is going through the roof.

Everything is looking great for small investors in equities, at least on the surface. However, a troubling trend often used as an indicator for future market movement is flashing huge warnings to flee the markets.

“In almost perfect coordination with an equity market that was rushing toward new all-time highs, insider sentiment has weakened sharply — falling to its lowest level since late March 2012,”wrote David Coleman of the Vickers Weekly Insider report, a highly respected researcher of executive trading on Wall Street. “Insiders are waving the cautionary flag in an increasingly aggressive manner.”

New York Stock Exchange

Credit: Wikipedi

For every executive insider purchasing shares, there are more than nine selling what they own. The last time insiders sold their own company’s stock this aggressively was right before a 10% correction in the S&P 500 in early 2012 that resulted in the lowest value for the index all year.

A longer perspective using data results in virtually the same conclusion, according to Vickers.The eight week sell-buy ratio is at 5-to-1, also the most bearish since early 2012. The last time this ratio hit these levels was right before another correction in the stock market in June 2011.

“Insiders know more than the vast majority of market participants,” said Enis Taner, global macro editor for RiskReversal.com. “And they’re usually right over a long period of time.”

A record $77.4 billion poured into equity mutual funds and ETFs in January and propped up share prices. When insider stake advantage of gains from small investors deciding to get back into equities, it is a foreboding sign of troubles ahead.

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