A Perfect Short-Term Trading Indicator?
How good would it be if you have a better than 80% chance of being right on the general market direction? Regular subscribers to Barrons get just that type of information each week as one part of their Insider Trading column features.
Thomson Reuters provides Barrons with a unique chart showing the ratio of marketwide insider sells to insider buys. Company officials pretty much always sell more of their own company’s shares than they buy due. This is due to employee compensation which includes incentive stock options and restricted stock awards.
When insider sells drop to under 12x their buys it’s considered bullish. Selling ratios above 20x purchase levels indicates possibly overvalued stock prices. The further these ratios are broached in either direction the stronger the conviction.
Over the past 12-months these signals have been especially valuable as you will see clearly from the supporting graphics. You’ll see how the market calls from this signal correlate with subsequent action the the S & P 500. Buy and sell ranges are always approximate rather than pinpoint. They have proven to be excellent guides which leave traders time to act. That is much more useful than technical tools which only trigger after moves have already occurred.
I’ve been effective utilizing this fine indicator for many years. Few non-fundamental timing tools have proven to be as valuable as this one.
After Friday’s almost 300 point DJIA surge the indicator is still borderline bullish.
Dr. Paul Price
June 30, 2012