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From the last week of October to the first week of November the market rallyed by over 20%. Directors were actively buying, outnumbering sells by at least 5 to 1, a huge sentiment change given that the status quo for directors transactions is generally between 1 and 1 1/2 (buys) to 1 (sells). See October 30th ‘Directors ARE buying shares’

So what happened in November?

 Directors interest waned, and the ratio of buys to sells dropped from above 5 in October to around 2.75 in November (source : This is still a hugely positive number. But anecdotally, looking at recent directors transactions, the level of activity in December has fallen away, probably in line with general stock market activity given what my friends in the industry have been telling me.

Fear not though. In late 2002 early 2003 it took almost eight months for early directors buying signals (4:1 buys to sells in August 2002) to result in a convincing change in direction for the market.

We experienced ratios of 4:1 (August ’02), followed by 3:1, 1.5:1, 2:1, 5:1 (December ’02), 1.5:1, 2:1, 2:1 (March) before the market started to turn. (source: Digitallook).

What I suppose I am suggesting is that the 5:1 signal of October is the beginning of the end. You’ll probably see 2-4 significant market setbacks, accompanied by Directors buying activity, before the wider market builds up confidence.

You want me to put a date on it? Why not. Nobody else out there has a clue what’s going on.

Put your money to work in Equities between now and Easter, and be prepared (or don’t be surprised by) to take advantage of a further 20% fall in the market before then.

My name is Simon Winfield, and I have worked in leading investment banks in London and New York over the last 25 years, marketing investment ideas to the worlds top institutional investment managers and hedge funds.

Over the years I have met with senior management of hundreds of UK and European companies. I found managements’ body language and what companies didn’t say to investors to be far more valuable than what they did say, and I learnt to take the corporate spiel with a large pinch of salt.

Directors personal share dealings cut through the talk. I see them as a sign of what management really think of the opportunities and risks their company faces, as well as the current and potential company valuation.

In looking at directors dealings I ignore all the ‘incentive plan’ deals, where the company matches what you buy. Why wouldn’t you buy stock if you’re getting it half price? I ignore all the options exercising too, as this is usually seen by directors as pay which needs to be turned into cash.

Anything I write here is my personal opinion, and is not a recommendation to buy or sell shares, just my commentary on activity in the market.

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October 2021