When stock markets declined in August, 1 group of investors showed unshakable confidence, Company insiders.
So much that the buy-to-sell ratio of corporate executives in Europe reached its highest mark since December, according to data compiled by 2iQ Research.
Such spike in the ratio, 3.3 in August is usually seen by market strategists as a contrarian buy-signal for equities. Top-level managers are considered to have superior knowledge of their businesses, and know when their company’s stock trade at bargain prices.
When markets sank in Q-4 last year, insiders piled up their own stocks, with the buy-to-sell ratio surging to 10.4 in October and staying high in November and December. That was followed by a 16% rally in the Stoxx 600 in the next 4 months of Y 2019.
Last month saw “a lot of buying activity in Europe, and the US. too,” says a managing official at 2iQ.
The insider buying activity contrasts with other investment flows and the light equity positioning among fund managers.
JPMorgan strategists write that they have not seen inflows into stocks returning, from neither retail nor institutional investors. Their prime-brokerage services indicate a subdued net exposure to shares across all regions, which could somehow limit the Southside
The strategists have just turned positive on stocks, arguing momentum has improved. They had previously called for two tactical corrections, in May and August, and now expect the market will be higher by the end of the year. Their “template” remains the 2015-2016 correction that was turned around by the Fed pausing its hikes, a peak in USD and Chinese stimulus — a similar pattern to the current situation. The view concurs with another buy signal from last week, when the BofAML Bull & Bear model showed its first bullish reading since early January.
Next week will be Key as traders expect a broad package of measures from the ECB meeting. That might be a problem, according to UBS economists, who see room for disappointment, particularly on the extent of a rate cut.
We wait, we see…
Tuesday, the major US stock market indexes finished at: DJIA -285.26 at 26118.00, NAS Comp -88.72 at 7874.19, S&P 500 -20.19 at 2906.27
Volume: Trade on the NYSE came in at 850-M/shares exchanged
- NAS Comp +18.7% YTD
- S&P 500 +15.9% YTD
- DJIA +12.0% YTD
- Russell 2000 +9.2% YTD
HeffX-LTN’s overall technical outlook for the major US stock indexes is Neutral to Bullish in here.