Stocks: What to Make of All This Insider Selling By Elliottwave International
Here are details of “The Great Cash-Out”
Corporate insiders may sell the shares of their company for any number of reasons but one of them is not because they think the price is going up.
In other words, insider selling can serve as a warning.
For example, the January 2022 Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, noted:
Only one group is selling. … Corporate insiders sold a record $64.5 billion of their firms’ shares through November [2021]. As the December [2021] Theorist noted, insiders “know what their companies are worth,” and “they’ve been selling their heads off.”
This commentary was published within days of the January 2022 highs in the Dow Industrials and S&P 500.
What does all this have to do with today?
You guessed it, insiders are in a selling mood again.
Here are just a few prominent examples:
In the last two months of 2023, Mark Zuckerberg, the executive chairman of Meta Platforms (Facebook), sold $400 million worth of Meta stock. He then sold another $661 million between January 31 and February 21.
Around this time, on Jan. 20, Bloomberg noted:
… a total of 1,000 insiders sold their own stock and 128 bought shares, leaving the sell-to-buy ratio poised for the highest monthly reading in data going back to 1988.
Then, on Feb. 27, we had this headline from Fortune:
The Great Cash-Out: Jeff Bezos, Leon Black, Jamie Dimon, and the Walton family have now sold a combined $11 billion in company stock this month …
JPMorgan CEO Jamie Dimon and Apollo Global Management co-founder Leon Black sold shares in their companies for the first time ever.
The Walton family unloaded $1.5 billion of Walmart shares and Jeff Bezos sold $8.5 billion of Amazon stock.
Also of note are the stock market activities of another very rich person — or shall I say the lack of activities.
Warren Buffet of Berkshire Hathaway is holding onto a record high stockpile of cash: $167.7 billion. The Oracle of Omaha says he sees “no candidates for capital deployment.”
Of course, major corporate insider selling is by no means the only indicator investors should watch.
Market participants may also want to monitor the repetitive patterns of investor psychology — which show up as Elliott waves on price charts.
If you’d like to delve into the details of Elliott wave analysis, read Frost & Prechter’s definitive text on the subject — Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:
It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.
The ability to identify such junctures is remarkable enough, but the Wave Principle is the only method of analysis that also provides guidelines for forecasting. Many of these guidelines are specific and can occasionally yield stunningly precise results.
Get more insights into the Wave Principle by reading the entire online version of the book for free.
