Despite the markets rise in recent days, a near term sell off is surely in the cards, and 2006 could be an awful year. Once again, insiders are selling like wild Indians. Yesterday's activity saw 67 buyers and 168 sellers. Today's insider results were continuing the selling trend with 69 buyers and 221 sellers.
As I have said before, I do not like to put my feet on the edge of a cliff. I feel much more comfortable waiting for stocks to come to me. Back in 1999, Warren Buffett was asked what he was doing in the current market environment, and he said, "Playing a lot of Bridge".
The homebuilding stocks showed signs of cracking the past few days. We might see a little recovery before they eventually break. Insider selling has been incredibly heavy in the sector.
Another key market indicator I follow is the VIX index. Over the past year our so the validity of the indicator has been criticized by various market pundits. Like everything else, an alert contrarian knows to question bullishness at market tops as well as pessimism at market bottoms.
The VIX Index is as a measure of volatility, as well as fear and complacency. Extreme high's or low's on the VIX Index usually signals a market reversal is coming. Since 2001, the VIX has registered a high of 83 in April of 2001, and a low of 12-13 set in July of this year. A higher number indicates fear and a potential market bottom, and a lower the number indicates complacency and a potential market top. Today's reading is 14.75.
At this stage of the game the old adage " Bulls make money, Bears make money, and Pigs get slaughtered" will once again ring true.
