Pay Attention to This Group of Investors (They Know More)

The stock market actions of corporate insiders is revealing

By Elliott Wave International

It stands to reason that executives of a corporation know more about the goings-on of their business than outsiders.

So, it's wise to pay attention to their stock market actions regarding their own shares.

Yes, the stock market has been rising. As I write, the Dow Industrials is up for the eighth day in a row.

However, trends can turn on a dime, and if the action of insiders is a clue, that turn may be arriving sooner than many stock market participants anticipate.

Here are just a few Yahoo! Finance headlines from the past few weeks:

• American Express Insiders Sold US$9.9m Of Shares Suggesting Hesitancy (July 17)
• Possible Bearish Signals with Lockheed Martin Insiders Disposing Stock (July 12)
• International Business Machines Insiders Sell US$5.6m Of Stock, Possibly Signaling Caution (July 4)

These are by no means all the corporations where insiders have been selling company shares. I just picked out three well-known names as examples.

The July Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, discussed corporate insider selling and said:

Insiders may sell for various reasons, but one of them isn't that they believe their firm's share price is going higher.

That doesn't mean that insiders are always right or that their market timing is perfect, but as the July Elliott Wave Financial Forecast also notes, it's best not to ignore the actions of insiders. The publication also showed this chart and added:

There is one group of investors that is selling shares: insiders. ... When insider block sales surged in the early months of [a big down wave], the August 2000 Elliott Wave Financial Forecast noted, "Insiders want out." As the bear market of 2000-2009 illustrated, when insiders sell, it's best not to pooh-pooh their stance.

In addition to the Insider Transaction Ratio, also pay close attention to the stock market's Elliott wave structure.

If you're unfamiliar with Elliott wave analysis, or simply need a refresher, here's a quote from the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter:

The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market's general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable.

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This article was syndicated by Elliott Wave International and was originally published under the headline Pay Attention to This Group of Investors (They Know More). EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Euro Stoxx 600: "Following the Script"

"If the 2007 analogue holds, the current rally [will] persist ..."

By Elliott Wave International

On Oct. 24, 2022, Bloomberg said:

Forget about a Santa rally to rescue European stocks from their doldrums, say strategists from Goldman Sachs Group Inc. to Bank of America Corp.

A week and a half later, our November 2022 Global Market Perspective offered a different view:

If the 2007 analogue holds, the current rally [will] persist ...

As it turned out, not only did the rally in the Euro Stoxx 600 persist through the holiday season, it carried well into 2023.

The just-published July Global Market Perspective, an Elliott Wave International publication which offers forecasts for 50-plus financial markets, provided an update with these charts and commentary [keep in mind that wave labels are available to subscribers]:

The charts bring the forecast up to date. In April and May, the Stoxx 600 briefly exceeded its 75% retracement level. On June 18, prices fell back below it and have yet to look back. The wave structure shows a complete zigzag at the May 19 high (see Elliott Wave Principle, p. 41, for the definition of a zigzag). A decline beneath the wave B low ... will confirm the onset of [the next Elliott wave] down.

The July Global Market Perspective mentions that specific price level which will confirm the next sizeable leg down.

Do know that not all our forecasts work out so well. At the same time, the Elliott wave model is the best analytical tool of which we're aware so we'll continue to base our forecasts on the repetitive patterns of investor psychology.

As Frost & Prechter noted in Elliott Wave Principle: Key to Market Behavior:

The Wave Principle is governed by man's social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

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This article was syndicated by Elliott Wave International and was originally published under the headline Euro Stoxx 600: "Following the Script". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.