They're more bullish today than they were three months ago, if just barely.
It may be damning the market with faint praise, but corporate insiders are more bullish today than they were three months ago.
Corporate insiders—a company’s officers, directors, and largest shareholders—presumably know a lot more than outsiders about their companies’ prospects. The Securities and Exchange Commission requires them to immediately report whenever they buy or sell shares of their companies’ stock, and many on Wall Street slice and dice those reports to detect any trends in insider behavior.
The indicator that his research found to have the greatest ability in predicting how the median U.S.-traded stock performs is based on those companies in which officers and directors have bought more shares than they sold. Nejat Seyhun expresses this proportion as a percentage of all companies for which there has been any insider buying or selling. The Seyhuns refer to this insider buying percentage as their Insider Sentiment Tracker.
The readings with the highest signal-to-noise ratio are those that are very low or very high. In research recently posted to their website, the Seyhuns measured the predictive value of readings below 20% and above 30%. Over the one month subsequent to above-30% readings over the past decade, the Russell 2000 gained an average of 3.2%. In contrast, over the subsequent month following below-20% readings, the Russell 2000 lost 0.8% on average.
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