Pre-War History and the Insider Sell/Buy Ratio: Both Bullish
No technical indicators are always right. The Thomson Reuters insider sales to purchases ratio does better than most at calling short-term (weeks-to months) market direction. Perhaps that’s because it is based on real money trading by knowledgeable company officers and directors.
Coming actions in Syria and the market’s reaction to those events might skew expected results. In a normalized environment the Thomson Reuters indicator seems to be calling for an end to the month-long decline.
What about a new Middle-Eastern war? How do you position for that?
Traders old enough to remember the market reaction prior to the 1991 Gulf War should keep that history in mind. The S&P 500 dropped about 6 – 7% in the weeks preceding the first air strikes. It then soared by more than 40% starting immediately after the fighting actually began.
Gold and oil (WTI) and the spot market price for the $US (DXY) all ran up ahead of the military action. All three then went into multi-month declines. Think twice before fleeing stocks for what appear to be safe-havens in times of international upheaval.
America’s official recession ended in the second quarter of 1991. Did the war pull us out of an economic funk? Who can say? President Obama may be hoping for a similar result or a least a patriotic distraction from his low approval ratings and poor GDP performance since taking office.
Positioning your portfolio too negatively might prove to be a bad idea. Shorting the market might turn out to be hazardous to your wealth.
See more investment-related ideas here http://marketshadows.com/value-investing
About the author: