Market Climate

As of last week,  stocks were characterised by unfavorable valuations and moderately favorable market action. Short-term, the market remains overvalued, overbought and overbullish,  a combination that has historically made stocks vulnerable to negative short-term returns even when market action has been favorable.

Adding to the general impression of an overextended stock market, we note that corporate insiders of stocks traded on the NYSE ramped up their selling activity last week to 7.81 shares sold for every share bought. On the Nasdaq, the insider sell/buy ratio shot up  to 6.36. Both ratios have more than doubled over the past few weeks. One wonders, if corporate insiders have so little optimism about their own shares, why should investors?