What Are Tech Insiders Telling Us?

1.) INSIDERS – Corporate insiders…officers and directors…have the best view of anyone when it comes to analyzing their specific companies. Insiders will sell stock for many reasons…diversifying portfolios, college tuition, second homes, helicopters, boats, etc. But they will only buy for one reason. They view their company as undervalued. And who would know better than those with an inside look at the books and sales generating revenue?! Tech companies have been under pressure lately. Yesterday I pointed out that the breadth of the tech sector within the S&P 500 has been lagging and asked the question if that sector in general was heading toward a slowdown that would affect their stock prices. Well, at least one group of tech investors appears to be viewing this as a buying opportunity. XLK is the Tech Sector Exchange Traded Fund (ETF), which is trading at about $179, down 9.6% since its recent (June 2) high. Insiders of the companies that make up this ETF are buying shares in the open market…no different than you or I would…at the highest rate/level ever. That’s conviction for their companies’ stocks. From a technical perspective, XLK is still in a bull trend. That trend range is $170-$163…meaning it could trade in or around that area and still be in a bullish, or upward bias trend. Since we have a month (July) of both growth and inflation decelerating, it would not be surprising for this ETF to test those areas. We’ll see.

2.) DJTR – What is DJTR? Donald J. Trump Risk. But it’s not the kind of risk you might be thinking of. Some of you will read that and instantly think of something President Trump does or says to bring Armageddon on the world. But for the first time since…believe it or not…Calvin Coolidge, we have a president who openly talks about the stock market. And that’s funny because Coolidge may have been the quietest president we’ve ever had. Trump probably says more in a day than Coolidge said in a month. At any moment, President Trump could mention a company or industry or the market in general in a speech, an interview, or on social media. We’re watching a president who regularly talks about stocks, celebrates companies he likes, highlights industries he wants America to dominate, and openly roots for higher stock prices. That’s not insignificant. Whether you agree with President Trump politically has nothing to do with it. The market doesn’t care about what you or anyone thinks about their politics. Markets don’t just move because companies report earnings. They move because investors constantly change their expectations about the future. Sometimes those expectations change because interest rates move. Sometimes they change because a company launches a new product. And sometimes they change because the President of the United States shines a spotlight on something in the market. And again, whether you think that should happen is beside the point. It is the environment we live in, and whether you love that or hate it doesn’t matter to markets. This is just about recognizing that some companies and industries, and by default, certain indexes, have headline risk most investors aren’t accounting for. Markets don’t wait until government money actually shows up in a company’s earnings. They begin pricing in the possibility long before that happens. Expectations change first. Prices usually follow. And it is clear that this government wants tech, AI, robotics, rare earths, etc., to succeed. Does that guarantee a market won’t correct? Nope. That’s the reason why we are systematic and completely rules-based investors. We’ll follow the money flows one day at a time.

3.) OIL – Last week I commented that if oil were to bounce, this is the spot (about $70/barrel WTI at the time). Well, here’s some of that “headline” risk I just mentioned. Oil (WTI – West Texas Intermediate) is up +5.7% since then. Some data out this AM that could push oil higher here in the near term is regarding short sellers. Managed Money short positions are signaling over 40%, which is the third-highest reading in 15 years. When you consider that plus record crack spreads, you have a recipe for an intermediate-term bottom. Oil up toward $85/barrel would not be a massive surprise, especially with the demand coming during this summer driving season.