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Insiders Are Buying the Panic Squeeze

By Brian Heyliger
Monday, October 27, 2008

It's amazing what a 50% decline does for insiders...
 
In September, investors pulled $43 billion out of mutual funds and hedge funds... The largest one-month withdraw ever. The October totals will be even greater. Folks just can't stand the stock market anymore.
 
And it's hard to find a sector that's suffered more from this money flow than the oil and gas industry. The industry had been one of the most popular trades of 2008. Now that funds are dumping their stocks, this sector is getting slammed. Just take a look at these losses since June:
 
ExxonMobil (major integrated) took as much as a 40% dive... Transocean (offshore drilling) is down 60%... Chesapeake Energy (natural gas) is down 70%... Schlumberger (largest oil services provider) is down 55%.
 
These are enormous moves in such a short time. They're panic moves.
 
 
But panic squeezes opportunity out of any market, and insiders know it. So of course, we've seen a lot of insider buying in the past month. In fact, the buy ratio for energy insiders is at watershed levels right now.
 
This ratio is simply the number of companies with corporate insider buying, divided by the number of companies with corporate insider selling. It's a great way to gauge insider sentiment.
 
Right now, the insider buy ratio for energy is more bullish than it's been in a decade.
 
For the past four weeks, this ratio has stood at 54%. It's usually closer to 30%.
 
The last time energy insiders were even remotely this bullish was late last year. The ratio then was just above 45%. It was the bottom for oil in 2007, and it preceded the huge runup in energy prices that we're coming down from now.
 
I don't think we'll see oil double again... at least not any time soon. But after falling from July highs, the whole sector's ready for a relief rally. Energy insiders have been buying everything related to energy... oil drilling, oil production, oil services, natural gas, pipelines, even utilities are being snapped up by insiders.
 
Traders should take note. With energy stocks so beaten up, I think a relief rally will bring quick gains. We don't have the trend on our side yet, but the entire sector is worth keeping your eye on.
 
Good trading,
 
Brian




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Market Notes
Japanese yen hits 13-year high against the dollar as the carry trade unwinds.
 
Oil shrugs off OPEC production cut... dips below $65. Petrobras, Repsol, CNOOC, PetroChina, and U.S. Oil Fund hit 52-week lows.
 
World's largest shipping company, Frontline, hits new low.
 
Earnings today... Loews, Plum Creek, SL Green Realty, Verizon.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%