The latest stats from Wall Street have confirmed what we already knew — that the dog days of this summer have been among the dullest ever recorded. “The past 30 days have been the least volatile of any 30-day period in more than two decades,” reported the Wall Street Journal Tuesday beneath the headline “Stock Market Turns Eerily Quiet”.  Is it the calm before the storm — or simply a lull before the next big rally? The evidence is persuasive that it is the former, and that in the current economic environment, it is ominous. For one, the stock market has moved steadily higher into new-record territory despite the downtrend in U.S. corporate earnings over the last five quarters. There are numerous other red flags as well. “Smart money has been coming out of the market for quite a while,” notes our old friend Garrett Jones in his latest Observations. “The retail investor has been pulling money out, too. It seems it is the large multinational companies buying back their stock and the central banks that are responsible for the market’s advance.

Insiders Are Selling

“Ironically,” Jones continues, “the insiders of those large multinationals aren’t part of those buybacks because they are selling their shares. In fact, the number of insiders buying stock has decreased by 44% over the past 12 months. The number of insiders selling in July was 442% more than buyers for a very weak 0.23 buy/sell ratio. When smart money and insiders are exiting the market in a serious manner, the odds are they are aware of something you might not be.”

Just so. For our part we are looking to short the E-Mini S&Ps at every promising, minor Hidden Pivot rally target — just in case. Our most recent such gambit, at 2190.75, had racked up a theoretical gain of more than $1100 per contract when subscribers were instructed to cover this morning using an extra-cautious stop-loss. The next enticing rally target lies not far above, and we’ll be looking to re-short there. Rinse and repeat. Presumably, the mainstream media, ever excitable and ignorant of the real world, will be trumpeting the new record highs as though they had been divinely ordained. If there is a difference this time, it is to be found in the palpable skittishness of individual investors. They have largely been out of the bull market, skeptical about the supposed economic ‘recovery’, and fearful that the institutional orgy of madness can come to no good end.