A few days ago we shared one of the few market timing tools followed by stock market analysts that we feel can be quite meaningful during times of extreme volatility like we’re experiencing in our portfolios today. Vickers Stock Research has published this barometer of real-time market sentiment since 1974. The NYSE/Ase One-Week Sell/Buy Ratio gauges the attitude of ‘inside traders’ – those corporate executives, directors and beneficial owners who are barred from trading during corporate earnings reporting season. It’s a pretty straightforward measure of the sense of opportunity or trouble for their own fortunes for those who should know and are in a position to act in their own behalf.
According to the ARGUS March 24, 2020 Market Review this gauge indicates a ‘bullish’ attitude when the ratio slips below 2.00, is ‘very bullish’ below 1.00. Today that ratio sits a 0.24 and is “mind-blowingly bullish” according to ARGUS. Depending on the day, the DJ Industrial Average has been down 30.0+% from its earlier year to date highs and ARGUS reports insiders “continue to fall over themselves in a mad rush to acquire shares that we can only assume they view as significantly oversold.” Market Review goes on to say insiders are, “acting as if this opportunity for investors is one that simply cannot be ignored.” This has happened only four times since the measure was introduced 46 six years ago. Not only this but, just as importantly the volume of trading for the Buy/Sell ratio is also very high and climbing.
We think this was worth sharing with you to help counter balance the hyper sensitivity the market is displaying day to day – and with good reason. It means that these corporate executive traders are betting on, and voting in volume with their pocketbooks that their companies, along with the market in general will recover in massive fashion and do so without enough warning for them to time their purchases. They’re getting in and grabbing up all they can while it’s on sale. They’re willing to accept the real risk of further decline from their own purchase prices to participate in the much larger upside opportunity. ARGUS is uncharacteristically gushing, “Dramatically lower insider selling; outrageously higher insider buying; meaningful volume; and a sentiment reading that it so bullish it has been achieved only four times in 46 years.” We believe this is bellwether information and should be taken by long term investors as a strong antidote to the meta-virus that has infected the market – panic. Take it now, put away your statements, remember this as you try to digest the news and – stay healthy!