Insiders Are Dumping Stock

From Reuters:

A massive rally in U.S. stocks since March has reawakened bullish spirits, but insiders are jumping out of the market in a sign the run up is getting stretched.
Company executives are selling stock at a rate not seen in two years after a near 50 percent rise in the S&P 500 from a March 9 low. That suggests directors and managers may think stock prices are nearing the top end of their range in the current economic climate.
There has been a decline in short interest — borrowed shares sold but not yet repurchased — which some analysts see as a warning. Some investors sell short to profit from price declines, and some say the recent rally has been supported by the reversing of short positions.

After a 50% rally, I think a sharp pullback is necessary. When it will happen and by how much is still a question. However, I don’t think the market really experienced a rally as much as we saw an unwinding of a vicious bear market.
The rally has been led by junk stocks which is really due to investors fleeing all investments which held any type of risk. The low-quality rally is mirrored by what’s been happening in the bond market with the closing of the gigantic spreads between corporates and Treasuries.

Posted by on August 18th, 2009 at 8:51 am


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