Still no insider confirmation of a bottom

Our INK US Indicator moved up slightly last week to 64% Wednesday, at which point there are 6.4 stocks with key insider buying for every 10 with selling. Given that the indicator is still on the rise, we have yet to see peak insider buying that typically occurs near market bottoms. Just as we see a lack of confirmation from our indicator that a durable floor has been established for stocks, we also fail to see confirmation from financial stocks.

The Financial Select Sector SPDR ETF (XLF) is once again trailing the broader market over the past 30 days. If the economy is as strong as the Federal Reserve thinks, we would expect the Financials sector to benefit from a rising rate environment. The inability of Financials to show leadership suggests that investors are worried about the economic outlook given the determination of the Fed to press ahead with a December rate hike as has been implied by recent speeches given by FOMC members including chairman Jerome Powell.

Falling financial stock prices have prompted significant levels of insider buying. We continue to have the Financials sector on watch for an upgrade to undervalued. The sector indicator is trying to establish a peak, and it would be welcome news should it do so. Since we are not there yet, we may very well see even more bargains in the sector emerge as prices continue to tumble.

This is an excerpt from the December 6th US Market INK report. The full version was made available to INK Research subscribers before the market open.