The Running Down Of The Bulls

If you follow the insider-sentiment stock market indicator printed weekly in BUSINESS WEEK, you know it has suddenly changed its tune.

The eight-week sell/buy ratio of insider trades compiled by Vickers Weekly Insider Report, which foreshadows rising markets when it falls below 2.25, has now risen close to that level. It was a lot lower and more bullish a few weeks ago--when compilers realized it was distorted by a recent change in data-collection method. The corrected index shown below suggests that the big bull move it signaled at the start of the year may be running out of steam.

That jibes with the well-known tendency of stocks to rise in the years before Presidential elections. Indeed, the 18.6% increase in the Standard & Poor's 500-stock index in the first half of this year ranks among the top six first-half rallies of the past 60 years, five of which have occurred in the third year of a Presidential term. Unfortunately, note analysts at SCI Capital Management Inc., every one of those big first-half rallies was followed by a loss in the second half--although full-year gains in all but one instance still stayed in the double digits.