Insiders pull back in tech, favoring other sectors
Corporate insiders have been fairly quiet lately. They were aggressively buying earlier this summer and have mostly drifted off modestly since then, with a reduction in both buying and selling activity.
Their buying activity in the energy sector has drifted off some, but their selling activity dropped off even more. The Buy/Sell Ratio keeps climbing and remains the highest in a decade.
In utility stocks, insiders have suddenly picked up their buying interest. The Buy/Sell Ratio is nearing a decade high, only exceeded by December 2015.
Insiders' velocity of buying has been impressive. Velocity, as we calculate it, is the 4-week rate of change in insider buys minus insider sells. The Backtest Engine shows that when velocity is above 20%, XLU has done quite well.
When it's been above 40%, like now, returns were even better.
Among the big drivers of the recent rally, the giant tech stocks that dominate the Nasdaq 100, insider buying has fallen off.
And insider selling is rising. This has not been a good reason to turn bearish on the NDX.
Corporate insider selling tends to be much less reliable than buying, and the modest drop-off we've seeing in buying in the broader market and in tech stocks isn't enough to be a worry. It's more notable that they've shown a large, and increasing, interest in energy and utilities.