[The following is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Lombardi goes on to say in further edited excerpts:
1. Insider Trading Activity
Those who are very close to the companies in key stock indices are selling their shares at an extreme pace.
- in February, insiders sold $5.3 billion worth of shares and bought roughly $268 million worth of shares; for every one dollar of stock they bought in February, they sold about $20.00 worth. (Source: “Insider Activity and Concentration by Industry,” CNBC web site.)
- corporate insiders are more bearish on the stocks of the companies they work for today than at any other time since 2007. (Source: MarketWatch, March 4, 2014.)
2. Corporate Earnings
The number of companies warning about their corporate earnings for the first quarter of 2014 continues to increase. So far, 84 companies on the S&P 500 have issued negative guidance about their first-quarter 2014 corporate earnings. (Source: FactSet, February 28, 2014.) Remember: corporate earnings, at the core, are what drive the key stock indices higher. Even analysts aren’t very optimistic about corporate earnings; they are expecting first-quarter corporate earnings growth of only 0.7%. (Source: Ibid.)
3. Margin Debt
Finally, the reckless buying of stocks is taking a very wrong turn: investors are buying with too much borrowed money. Please look at the chart below:
The chart above gives me more reasons to be bearish on the key stock indices. In January, margin debt on the New York Stock Exchange (NYSE) reached its highest level ever recorded at $451.3 Billion, surpassing its previous record that happened—yes, you guessed it—just before the stock market sell-offs in 2007.
It’s frustrating to see key stock indices keep pushing higher when historically proven market indicators are all warning of a crash ahead. Irrationality is exuberant to say the very least, and that’s why I believe this rally is counting its last days.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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