Insiders are Selling like Never Before (while retail is buying)

Retail investors are currently exhibiting extremely high bullish sentiment, while corporate insiders are selling at a record pace, which historically has preceded market corrections. The current market conditions, with a high level of retail bullishness and record insider selling, may signal a potential blow-off top before a significant market correction, though the long-term investor should not be overly concerned.

Retail Investor Sentiment

• 00:00:55 Small retail investors have become increasingly bullish in the past year and a half, reaching levels not seen since before the 2008 financial crisis. Their bullish sentiment is at odds with the historically more informed 'smart money' or corporate insiders. Retail investors historically tend to have less financial sophistication and information than the 'smart money' and often make investment decisions that contradict the market's direction.

Insider Selling

• 00:06:09 Corporate insiders, who have access to more accurate information about their companies' health and value, are currently selling their shares at a record pace. Historically, extreme spikes in insider selling have preceded major market corrections, such as the 2008 financial crisis. While the market could continue a bull run for a while, it could lead to a 'blow-off top' before a correction.

Market Outlook

• 00:07:17 The current combination of extreme retail bullishness and record insider selling may be a precursor to a significant market correction, potentially including a 'blow-off top' similar to the one observed in 2020. Long-term investors are advised not to make drastic changes to their portfolios based on these short-term trends. While hedging or short-term trading opportunities may exist for some, the overall outlook for long-term investors remains largely unaffected.