Recent trading activity by corporate insiders is painting a gloomy picture for the stock market.
Data shows that only 11.1% of companies with insider transactions in the past month experienced more buying than selling by officers and directors.
This is the lowest percentage on record, highlighting an unusually strong wave of insider pessimism, according to insights shared by financial commentary platform The Kobeissi Letter in an X post on July 22.
The trend is particularly concerning given that this figure has not dropped below 15% at any point in the past decade.
To this end, the data implies that nearly nine in ten companies with insider activity saw net selling, as executives and board members trimmed their holdings rather than increasing them.
Insider selling was also widespread, dominating 10 of the 11 S&P 500 sectors, with utilities being the sole exception, where net insider buying occurred.
Moreover, this bearish sentiment extended across company sizes, from small-caps to large-cap giants, highlighting that this is not an isolated phenomenon but a broad, systemic retreat by corporate leadership.
Receive Signals on SEC-verified Insider Stock Trades
This signal is triggered upon the reporting of the trade to the Securities and Exchange Commission (SEC).
Implication of growing insider sales
Consequently, this divergence may serve as a red flag for a market currently trading at new highs.
Historically, insider activity has often acted as a reliable contrarian indicator. Insider buying usually reflects confidence in a company’s future. By contrast, the current wave of selling suggests executives could be bracing for turbulence ahead.
The insider selling trend has touched several top S&P 500 companies. For instance, at Nvidia (NASDAQ: NVDA) and Palantir (NASDAQ: PLTR), executives have offloaded over $1 billion worth of shares each, mostly through legal 10b5-1 plans, amid record stock prices. Analysts have cited motives such as profit-taking and diversification.
In contrast, insiders at UnitedHealth (NYSE: UNH) have been buying aggressively following a significant dip in the stock. The move has largely been interpreted as an attempt to restore confidence in the equity.
Featured image via Shutterstock
