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Insider selling within general market may tank auto sector stocks too

Mark Hulbert, founder of Hulbert Financial Digest, tracks more than 160 financial newsletters; and one of them involves Argus Research, which shows insiders selling at a ratio not seen since last summer’s sell-off. Should this be a cautionary note for auto sector stocks, too?

Insider selling is not a respecter or persons. When it hits the general market, it can transcend a specific sector and extend to other sectors with its negative effects. So, the follow-up question here is: Will insider selling this time around, which hints at a general market sell-off, drive auto sector stocks down, despite the strength and all the gains achieved in the past year? And how far might they fall?

Mark Hulbert, founder of Hulbert Financial Digest in Annandale, Va., has been tracking the advice of more than 160 financial newsletters since 1980. So, his access to information is much greater than the general public. In this he looks for trends and repeatability based on probability.

As a trader, I have great respect for Mr. Hulbert’s work. So, it should be no surprise that I might view this documented sell-off warning as a precursor, applicable to more than just the general market; more specifically to auto stocks. Point is, regardless of who is doing the selling, if it’s big enough, then all sectors can be affected.

Hulbert’s latest article for MarketWatch.com says corporate insiders are now selling their companies’ stock at a rate not seen since late last July. Why is this a concern? A late July, 2011 spike in selling came just days before a very painful two-week period. I remember it well. In fact, it was rated as severe by many.


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