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Corporate Insiders Are Scared. Should You Be, Too?

Here's what CEOs of major U.S. banks have been doing since one day after the election

by Bob Stokes
Updated: January 30, 2017

Since Nov. 1, 2016, the U.S. financial sector has rallied 21%.

And yet, throughout most of that period – in fact, since one day after the election --  the sector's corporate insiders have been selling stocks, not buying them (CNBC, Jan. 24):

Company leaders at Morgan Stanley, JPMorgan, and Goldman Sachs sold nearly $100 million in stocks since Nov. 9 — the most in that time period in the last decade. …

We've repeatedly said that there may be many reasons why insiders sell their shares, but one of them is not because they think the price of their company’s stock is going to go up.

In February and March 2000, as the S&P 500 index was climbing to its then all-time high, insiders sold $18 billion in stocks. That was the biggest two-month selling spree on record.

Some seven years later, the selling was even more intense. This chart and commentary are from our January 2007 Elliott Wave Financial Forecast:

While Wall Street loves stocks, the chart shows that those closest to corporate prospects are selling their own shares more furiously than at any point in the last decade. According to various services, insider sell/buy ratios are at their highest level since 1987, right before a stock market crash. Lower levels of insider selling helped the Financial Forecast identify selling opportunities in July 1998, April 2000 and July 2002.

As we know, nine months later, the S&P 500 hit a major high and went on to surrender about half of its value through March 2009.

For more precise timing of anticipated market turns, we suggest reviewing the market's Elliott wave price pattern.

You will see why that chart pattern is now approaching a historic juncture.
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