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Welcome to edition 399 of Insider Weekends. Insider buying declined a little last week with insiders purchasing $46.39 million of stock compared to $47.89 million in the week prior. Selling also declined with insiders selling $994.97 million of stock last week compared to $1.03 billion in the week prior.
While insider buying for the week in dollars was a little below the prior week, the number of insiders who purchased stock last week nearly doubled. As more companies release earnings, we are likely to see this pace of insider buying increase, especially if this market correction continues. We have had two weeks of declines of 3.85% and 5.16% in the S&P 500, which in my opinion has put most stocks at the levels we saw at the beginning of the year. If stocks did not appear very attractive at the start of this year on a valuation basis, then I don’t see how they would appear more attractive now, besides the fact that most investors are anchored to a higher price.
One thing for certain is that volatility has returned to this market and we may not see a complacent rise up like we saw all of last year and in the first four weeks of this year. The 1.49% rise in the S&P 500 on Friday was achieved after the index oscillated between gains and losses several times through the day. I wrote the following two weeks ago and still feel that the risk continues to remain on the downside.
The S&P 500 has gained 7.45% since the start of this year after gaining over 21% in 2017. According to Preston Pysh, “the S&P500 is priced at 3 Standard Deviations above the 200 DMA. Last time we saw that it was 24 March 2000.”.
It feels like a large part of the global growth story and a lower corporate tax rate is already baked into the markets. This does not mean a correction is imminent as this “melt up” phase of the market can continue for several months.