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S&P 500 (SPY) – Insiders in the lowest activity for a decade

An insider in the financial market is a person who is associated with a particular company. Mostly it is the top management (CEO, CFO, Director ..). It can also be a person or a company with at least a 10% stake in the company.

It has been interesting to follow the so-called “Insider trading” throughout the market in recent years and months. It is a crucial indicator that can help us in making investment decisions. The fact that insiders buy or sell shares of their company can be ascertained with the SEC’s help. Nowadays, it is no longer a problem to find this information.

What to be aware of?

If one or more insiders sell in small quantities, this may be of little importance to the market. This could be for several reasons: they acquired shares from options, which they then wanted to sell for their needs. They can also sell shares because of the bonuses they received in shares and tried to monetize them. However, important information comes to the market when we learn that insiders have bought or sold their shares in significant quantities. The example below shows how much it depends on the volumes that insiders buy or sell. MDLA, insider trading, and subsequent response.

MDLA insider trading. Source: Gurufocus

Insider trading is not a “gamechanger”. Sometimes there is no reason, but there may be an indication that the company is undervalued or overvalued from its managers’ point of view. Alternatively, they know information that the market does not yet know (positive or negative).

Insiders are smart investors

It certainly applies to insiders that they usually think smar t. They buy on dips and sell on tops. This and how they buy in the US in all companies and volumes for each period is shown in the chart below. It monitors the price of the ETF SPY, which is following the S&P 500 index. Then we can see the “ratio”, which gives the ratio of the number of buyers and sellers. In practice, the higher this ratio, the greater the buying interest of insiders and vice versa. We also show a 3-month moving average for better monitoring of market sentiment in the medium term.

default Source: Patrik Mackovych’s calculation. Data by gurufocus.

The current ratio and the three-month average indicate very low insider’s bullish activity. Take a look and compare the situations that happened if we do not see insiders’ interest at such levels in the past. Our average is at its lowest level since 2007, which is not very good news for bulls .

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...


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