Warren Buffett just offloaded $6 billion worth of stocks.
Michael Burry, the investor who famously predicted the 2008 crisis, has also slashed his portfolio.
The Corporate Insider Buy/Sell Ratio is currently showing the highest level of corporate insider selling since late 2021.
- Reminder: Bill Gates, Jeff Bezos, and Elon Musk all sold record amounts then.
- Right before a 25% market drawdown in 2022.
But Wait, Retail Investors Are… Bullish?
While the big players are selling, retail sentiment is soaring:
- AAII survey shows record bullish sentiment
- Green line (50-day average) is at levels preceding major market peaks
This is the exact opposite scenario from late 2022.
Back then, recession fears were high and bearish sentiment was dominant.
That was the moment when we were telling our clients to buy for the long run.
Today, after a massive rally, investors struggle to see downside risks.
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Is AAII bulls a Perfect Timing Tool?
Not quite…
The AAII survey isn’t foolproof.
1. August 2021:
Extreme bullish reading, but market peaked in January 2022
2. July 2006:
High bullishness, but market topped in October 2007
Key Takeaway: Bullish sentiment can persist for months before the market peaks.
Smart Money Says… Go Long?
Despite long-term caution signals, short-term indicators are bullish.
One such signal comes from the OEX open interest ratio.
Over the last 20 years, these traders have been quite accurate at timing the market.
When this ratio is high, it means they’re going short, often coinciding with market tops.
Smart Money is betting on upside
Conversely, when the ratio is low, it signals they’re going long.
This usually marks the bottom of a downturn.
Today, the OEX open interest ratio is at extremely long levels.
This is the most aggressive long position since March 2009 (bear market bottom).
NYSE Advance-Decline Line Signals Upside
Another indicator we track closely is the NYSE Advanced/Decline Line.
This indicator shows the number of stocks rising vs. falling.
In recent months, a record number of stocks have been advancing, despite market consolidation.
Strong breadth suggests a potential breakout to ATHs, rather than a market downturn.
Want to Profit from the Markets?
Our real-time Trade Alerts are concise and include all necessary details:
- Long/Short position
- Allocation weight
- Entry and Stop-loss points
- Reasoning for the trade
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