QQQ - CDT Insider Sentiment Ratio October 2023: Low Sentiment-High Risk

2023-11-06 07:30:00 ET

Summary

• Although the S&P 500 bottomed out around -4% during the week of the 23rd, markets have quickly rebounded off those lows and are now up around +1.7% since the bullish insider call.
• A record increase in interest rates, historically high inflation and a very uneven economic expansion is making people nervous, and that is borne out even for insiders.
• November will be a pivotal month for establishing a trend.

Buckle your seatbelt.

Insiders were just a little early in September, but they were not wrong. Although the S&P 500 bottomed out around -4% during the week of the 23rd, markets have quickly rebounded off those lows and are now up around +1.7% since the bullish insider call. Historically, we have had tremendous success in buying the markets dips divergent with positive insider sentiment, and October did not disappoint. Fast forwarding to now and... we are back to negative sentiment. Amid earnings season, I just don’t have the time to isolate and measure statistically just how abnormal these extreme swings are, but anecdotally, we can say that after doing this for 6 years, 2023 is a total and complete outlier. Typically, there is something of an insider “cycle” in which sentiment swings abruptly between negative or positive sentiment based on some exogenous shock to the system and then it gradually finds its way back to the other paradigm (positive to slowly negative, negative to slowly positive). Today, we are just all over the place, and we hypothesize that it is simply just a confusing time for so many. A record increase in interest rates, historically high inflation and a very uneven economic expansion is making people of all walks of life nervous, and that is borne out even for insiders. Additionally, it is possible that the drop in activity exiting October could have been an earning season reporting anomaly. Either way, November will be a pivotal month for establishing a trend. Either the summer malaise has bled into the fall or the September enthusiasm will reignite - stay tuned.

Expect turbulence.

How it Works

Objective:

Predictive model that measures the historical relationship between insider sentiment and the future probability of downside volatility (risk).

Insider Trading Activity:

Purchase activity of an insider's own stock filtered by proprietary parameters to scrub noisy data.

Insight:

Executive-level insider sentiment is an indicator of near-term financial market risk.

- Low executive sentiment suggests a high level of risk

- High executive sentiment suggests a low level of risk

Scale: A ratio of current insider trading activity in relation to historical patterns

- (0 to ?) with a historical median measure of 1

- Below 1 implies an above normal level of risk

- Above 1 implies a below normal level of risk

Frequency:

The measure is updated daily and historically been subject to swift and possibly extreme shifts.

*This webpage is updated monthly and provides just a snapshot of the most recent month-end.

Disclosures

This presentation does not constitute investment advice or a recommendation. The publisher of this report, CDT Capital Management, LLC ("CDT") is not a registered investment advisor. Additionally, the presentation does not constitute an offer to sell nor the solicitation of an offer to buy interests in CDT's advised fund, CDT Capital VNAV, LLC ("The Fund") or related entities and may not be relied upon in connection with the purchase or sale of any security. Any offer or solicitation of an offer to buy an interest in the Fund or related entities will only be made by means of delivery of a detailed Term Sheet, Amended and Restated Limited Liability Company Agreement and Subscription Agreement, which collectively contain a description of the material terms (including, without limitation, risk factors, conflicts of interest and fees and charges) relating to such investment and only in those jurisdictions where permitted by applicable law. You are cautioned against using this information as the basis for making a decision to purchase any security.

Certain information, opinions and statistical data relating to the industry and general market trends and conditions contained in this presentation were obtained or derived from third-party sources believed to be reliable, but CDT or related entities make any representation that such information is accurate or complete. You should not rely on this presentation as the basis upon which to make any investment decision. To the extent that you rely on this presentation in connection with any investment decision, you do so at your own risk. This presentation does not purport to be complete on any topic addressed. The information in this presentation is provided to you as of the date(s) indicated, and CDT intends to update the information after its distribution, even in the event that the information becomes materially inaccurate. Certain information contained in this presentation includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results, and such differences may be material.

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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