Bears prowl Wall St as insiders dump
Sunday, 16 August 2009
NEW YORK Aug 15 (Reuters): A massive rally in U.S. stocks since March has reawakened bullish spirits, but insiders are jumping out of the market in a sign the run up is getting stretched.
Company executives are selling stock at a rate not seen in two years after a near 50 percent rise in the S&P 500 from a March 9 low. That suggests directors and managers may think stock prices are nearing the top end of their range in the current economic climate.
There has been a decline in short interest -- borrowed shares sold but not yet repurchased -- which some analysts see as a warning. Some investors sell short to profit from price declines, and some say the recent rally has been supported by the reversing of short positions.
For brokerage Jefferies & Co., a significant increase in insider selling transactions as well as a decrease in short interest across most sectors of the S&P 500 demonstrates the weathering of the bear market rally.
Short interest fell in mid-July and firms with insider selling activity outnumber those with buying activity two to one, according to research firm InsiderScore.com.
"Both of those (factors) lends to our general thesis" that the equity market rally is running on borrowed time, said Patrick Neal, head of U.S. equity strategy at Jefferies & Co.
Since early March investors have piled back into the stock market in the hope of an economic recovery, bank sector stabilization and expectations many more will follow them.
But there are doubts the run-up is warranted amid signs of a difficult economic recovery.
Company executives are selling stock at a rate not seen in two years after a near 50 percent rise in the S&P 500 from a March 9 low. That suggests directors and managers may think stock prices are nearing the top end of their range in the current economic climate.
There has been a decline in short interest -- borrowed shares sold but not yet repurchased -- which some analysts see as a warning. Some investors sell short to profit from price declines, and some say the recent rally has been supported by the reversing of short positions.
For brokerage Jefferies & Co., a significant increase in insider selling transactions as well as a decrease in short interest across most sectors of the S&P 500 demonstrates the weathering of the bear market rally.
Short interest fell in mid-July and firms with insider selling activity outnumber those with buying activity two to one, according to research firm InsiderScore.com.
"Both of those (factors) lends to our general thesis" that the equity market rally is running on borrowed time, said Patrick Neal, head of U.S. equity strategy at Jefferies & Co.
Since early March investors have piled back into the stock market in the hope of an economic recovery, bank sector stabilization and expectations many more will follow them.
But there are doubts the run-up is warranted amid signs of a difficult economic recovery.