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The Most Unbelievable Fact You'll Hear Today

By Dr. Steve Sjuggerud
Monday, November 14, 2005

I almost fell out of my chair when I saw the numbers...

Look, it’s hard to surprise me when it comes to investing. But when I saw how much insider selling is currently going on with stocks in the Nasdaq 100 index (which contains Microsoft, eBay, and Intel) I was truly surprised...

There’s only a few times I really pay attention to the activity of company executives. When the selling – or buying – of these corporate insiders hits an extreme, it’s often a leading indicator of what’s coming in the stock market six-to-nine months down the road.

Insiders are worth paying attention to. According to Graham Summers, editor of Inside Strategist, corporate insiders “called the Bull Market of 1974, the Crash of 1987, and the Tech Bubble.”

Graham recently said that “insiders have been selling their shares at even greater rates since the Tech Bubble burst.” Graham added we’re at “record highs” for insider selling, but he didn’t give me the specifics. So I looked it up myself... and that’s when I almost fell out of my chair...

For every $1 that Nasdaq 100 corporate insiders spent BUYING shares of their company’s stock in October, they SOLD $3,647.41 worth of stock.

Now it’s not uncommon to see this ratio at 20-to-1 or more. Insiders simply sell more stock than they buy. But a ratio of 3,647-to-1, that’s got to be a record.

What’s it mean? Looking closely at the numbers, the ratio was high simply because insiders hardly bought anything last month.

Normally, insider selling doesn’t worry me. There are a variety of reasons an insider might sell. But there’s only one reason insiders buy: They’re optimistic about the stock’s future...and they want to make money.

Who were the biggest sellers in the Nasdaq 100 last month? Insiders at Apple and Yahoo. Insiders at Apple and Yahoo sold about $200 million worth of stock last month. When you add up the insider buys of all 100 companies in the Nasdaq 100, only $94,900 worth of stock was bought.

These big tech stocks haven’t started to fall yet. Graham says, “I’ve been wondering when the big bear market implied by this rampant insider selling would come out.”

Remember, insiders tend to lead the markets, often by six-to-nine months.

If last month’s complete lack of insider buying in the Nasdaq 100 is any indication, the recent rally in the Nasdaq isn’t sustainable. Clearly, the smart money (insiders) is NOT buying. It must be the dumb money buying Nasdaq stocks right now.

Don’t you want to be on the side of the smart money?

For every dollar of stock bought, insiders sold $3,647.41 of stock last month. There’s no way that can be spun into a positive for Nasdaq stocks going forward...

Good investing,

Steve Sjuggerud

Market Notes


Last week, the latest reading of the Hulbert Bond Newsletter Sentiment Index (HBNSI) hit minus 67.4%, equaling the highest amount of pessimism towards bonds ever recorded by the index.

The last time 67.4% was hit on April 5, 2005, bonds rallied sharply over the next few months.


…the day after the Commerce Department reported a $66.1 billion trade deficit – by far the largest one month trade deficit in history.

“We were much... MUCH... impressed by the U.S. dollar's response to the U.S. trade data,” said Dennis Gartman on Friday. “And we've really no choice to begin our commentary this morning with the strong recommendation that long dollar positions must be added to.”

A two-year chart of the U.S. dollar index:


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