Jan

31

I subscribe to an investment newsletter whose aggregations of insider trading data provide value to me. This newsletter also provides market commentary, some based on technical analysis. One indicator is the number of "buying climaxes" in individual stocks. A buying climax is defined as a week in which the stock makes a new 52-week high, but then closes lower than the previous week. This pattern is interpreted as bearish because it suggests that "distribution" is occurring, i.e., informed investors are selling to uninformed investors.

In each of the last two weeks, a buying climax has occurred in the S&P 500 futures. Is that bearish?

The average 6-month change in the S&P 500 futures since 1983 has been 1.9% with a standard deviation of 15%. There were 74 buying climaxes from 1983 to mid-2010. Six months after the buying climaxes, the S&P 500 futures were up an average of 1.8%.

Using only non-overlapping look-ahead periods, there were 23
non-overlapping buying climaxes, and six months later, the S&P 500
futures were up an average of 2.6%, insignificantly better than average with a t score of 0.51. In defense of my newsletter, it reports climaxes for individual stocks, which may be predictive for all I know.

For the futures, I do not conclude that a buying climax is bearish. The high level of insider selling in the past three months looks negative–but this must be tested.

    Change
   Date        next 6 months
 2/15/1985              -2%
 3/21/1986              -4%
 3/13/1987             10%
10/28/1988               9%
 5/26/1989               4%
   9/6/1991               3%
12/24/1992               2%
 9/17/1993               2%
 3/31/1995             15%
12/15/1995               6%
 9/27/1996               9%
 7/11/1997              -2%
 3/27/1998              -7%
   2/5/1999               3%
   1/7/2000              -1%
 9/12/2003               9%
11/19/2004               1%
 7/29/2005               3%
 3/24/2006              -1%
11/24/2006               8%
 7/20/2007            -16%
10/23/2009             13%
 4/30/2010               0%


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search