Insider analysis October 2010: Insiders skeptical - as before

October has been a benign month on the German stock market. The DAX actually overcame its old highs and at the same time embarked on a brilliant year-end rally that is still underway. In the course of this development, it is particularly revealing to take a closer look at the behavior of market insiders. For this purpose, the Insider-Alarm enough data every month.

Slight increase

Our sentiment indicator shows at first glance that the situation among insiders has had a certain positive effect. In the past month, it was able to move up slightly by 0.2 basis points and is now positive again. Compared with September, the outflow of capital was only slight. In terms of volume, purchases and sales are more or less in balance, with a ratio of 46% to 54%.

What is strikingly positive is the quantitative Majority in purchases. With a proud 81 percent buying share, the highest value since May was measured here. The insiders are therefore active as buyers in the most diverse corners of the market. However, their positions are generally small and cautious. Nevertheless, they are showing a broad interest in a wide range of companies and are by no means running away from the market.

Already heavily invested

You have to take into account that most insiders have been in the market for a long time. After all, it goes hand in hand with a certain company loyalty to own shares in one's employer. Therefore, large purchases were primarily found in the phases when the prices were still favorable, in 2008 and 2009. Often, therefore, they now appear on the sell side to take profits.

While the DAX broke out of its sideways phase and many charts of individual companies did the same, insiders participated only marginally in the recent rise. The current reporting season also did not prompt any conspicuous buying volume. Although October has been a strong month, insiders kept a low profile in the renewed upswing in share prices. Overall volume is at its lowest level since the vacation month of July.

Healthy skepticism

You can thus attest to the insiders' healthy skepticism. In a way, this also fits in with reality. The current bull market is partly due to the loose monetary policy of the Federal Reserve and the generally favorable investment climate. As you know, there is open talk of a liquidity glut that is not only affecting the stock markets. In return, the further indebtedness of the states is apparently being blindly accepted.

These international behaviors have little to do with the kind of sensible and sustainable business sense that German management and supervisory boards possess. Our corporate leaders know that there are limits to the amount of debt they can incur. Just a few months ago, some of them experienced what it's like when it suddenly becomes more difficult to get loans at all - keyword financial crisis. It is quite conceivable that the majority of insiders are already looking forward to the hard landing next year, when economic growth worldwide is expected to be lower again.

Conclusion

Overall, insiders are currently keeping a low profile. Selective buying goes hand in hand with selective profit taking. There was neither euphoric buying nor a panic flight from investments. This indicates that the current rise may already herald the end of the movement that began in spring 2009. This should not prevent the DAX from rising above the 7,000 mark - it's just that the biggest gains are already behind us, if insiders have their way.