INSIDER CONSENSUS (Negative Consensus/Bull Market Indicator) Boots on the ground selling stocks

November 25, 2015

A good indicator of sentiment in the stock market is the rate at which corporate insiders are buying or selling their own company stock. The sentiment appears to be to sell right now.  Corporate insiders have been dumping shares at the highest pace in 4½ years, according to market data firm TrimTabs. The selling averaged $450 million a day in November, the highest since May 2011.

"Talk about crosscurrents," said Jim Paulsen, chief market strategist at Wells Capital Management. "The insider selling is a real negative signal for the market typically."

Insiders are useful to watch because they have boots on the ground and have real time intelligence on how their business is behaving and more importantly how their customers are behaving. If they see that weakness in earnings and sales is on the horizon, they might be more inclined to bank some of their own stock.

Conversely, with the potential for share prices to fall, buying opportunities may emerge for high quality companies down the road.