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This page contains analysis by Insider Insights, and does not necessarily represent the views of Sundial Capital Research. The weekly viewpoints and charts from Insider Insights are presented to subscribers of sentimenTrader as an aide in your attempt to determine current levels of investor sentiment. Insider purchases and sales take a unique skill set (and a good amount of experience) to evaluate correctly, which is why we have decided to partner with the experts at Insider Insights. Please go to www.insiderinsights.com to view more of their unique and value-added research.
March 5, 2010
The indices have seriously threatened to reverse course several times since the market’s impressive rally began March 2009. We raised cash levels substantially last June, October, and November to acknowledge the many macro issues that could have (and still could) cause a justifiable, large retracement for stocks. But hindsight shows that we over-insured our Recommended List last year against our macroeconomic fears. Although we ended up outperforming our benchmarks handily in 2009 nonetheless, we made a conscious decision last issue to start buying this present dip instead of running from it. We are making our final move in that trend this issue, by lowering our cash down to 0%. The last time we moved to fully invested was way back in April 2008. Our boldness is bolstered by a lack of obviously bearish signals from our weekly insider buy/sell ratios. The absolute level of the 4- week average of our insider buy/sell ratios (see yellow oval on Chart) is in middling territory relative to the past seven years, making a definitive call on the direction of the market’s next big move uncertain. As annoying as this uncertainty is (as well as the fact that the last two sell then buy signals proved too short-lived to take advantage of), at least overall insider activity is not obviously bearish. At the same time, executives have started to buy the dip themselves, producing company specific insider buying signals that are more compelling than present company specific selling signals. It is still impossible to know if this latest market weakness will end up being the long-overdue deep correction to what history could still end up labeling as one of the greatest bear-market rallies ever. But this time we’re playing it less safe. We are not wed to this tactical move, however, and will be quick to raise cash if conditions dictate. Better to be nimble than dogmatic in this tricky market.
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