WAKE UP CALL!

Last week: Across all the US exchanges, insider share sales were nearly 9.5X the number of insider share buys.   This is the highest ratio of shares sold to shares bought across all US exchanges — since the provider of this data began keeping records in 1998.   Panic selling. 

On the NYSE alone, insider share sales were more than 10X the number of insider share buys. This is stunning.

Has this ever happened before?   Yes: 2007 and 2011.

I use a 4-week moving average to smooth-out weekly noise. The charts tell a story that is obvious.

Let me refresh your memory regarding insider selling in 2007.  Of course, you know what eventually came later in the year.

rats jumping ship 2007

 

Below is the chart for 2011. Back in July 2011, the Greedometer indicated the market was topping-out and would begin to collapse. Some of you know I took out a 1/4 page ad in the Wall St Journal to announce this. The S&P500 dropped roughly 19% before the Fed and ECB had to spike the punch bowl again — stopping the collapse.  This chart sure looks a lot like the 2007 chart.

rats jumping ship 2011

Here we are in 2013. The chart is starting out the same. (yes, that’s my forecast for this data set and the S&P500 for the rest of the year)

rats jumping ship 2013

If this collapse were to unfold as slowly as the one in 2007, you’d have until October to unload your risk assets (stocks, junk bonds, REITS, commodities).  I don’t see the party going that long this time. Don’t forget, the US did not enter recession until December 2007.  This partially explains why the S&P500 peaked in October (2 months prior). My estimate calls for the US to enter recession in May this year.

In 2011, the S&P500 peaked in April-May, pulled back a bit, then rallied back to within less than 1% of the April peak again in July. So you might have until July to unload your risk assets. But again I don’t see the party lasting that long either. I have no doubt we’ll see a faith-based rally of risk assets in early July, but doubt it will make it all the way back to the levels likely to be seen in April’s peak.

This is going to be very interesting to model with the mini Greedometer.