It pays to do the opposite of what the crowd is doing in the markets, particularly when crowd behavior approaches extremes.

Is the stock market at a near-term top? Here’s a troubling new data point to consider: Corporate insiders — companies’ officers and directors — are more bearish than at any time since 1974.

A one-week sell/buy ratio for all exchanges tracked by Vickers Insider Weekly recently hit 17.32. This is far above normal — considering that anything above 6 for this indicator is bearish, and anything below 2 is bullish.

These insiders have front-row seats at their companies. This gives them unique insight about the tone of business, which they are legally allowed to trade on — with some restrictions. Their caution is spread across all of the economy’s sectors, but particularly in information technology, utilities and healthcare.

The New York Stock Exchange one-week sell/buy ratio is even more negative, at a jaw-dropping 27.25. By comparison, it hit 16.15 in February 2007 — just ahead of one of the worst bear markets ever, sparked by the global financial crisis.

What’s worse, the historic extreme insider caution confirms two other cautionary data points.

1. Investors are quite bullish: This is a negative in the contrarian sense. Generally, it pays to do the opposite of what the crowd is doing in the markets, particularly when crowd behavior approaches extremes. That’s where we are now. The Investors Intelligence bull/bear ratio on Oct. 15 was 3.5, and the week before it was 3.7. Typically once sentiment hits these levels, trouble in the market pulls down stocks and curbs investor enthusiasm.

Valuations are also in rarified territory: They are at elevated levels that typically do not last for long. The S&P 500 recently traded at a forward price-to-earnings ratio of 22.5. Market valuations usually are well below this level, suggesting a pullback might happen sooner or later.

Don’t cash out — yet

The market has little room for error, and stocks are increasingly vulnerable to the unexpected.

Here are two reasons you should not take insider negativity as a sign to sell out your portfolio.

1. Insiders’ extreme caution may be more of a signal that they think valuations are so rich there is little room for more upside, rather than a sign of a looming disaster that will spark heavy selling. The insider sell/buy ratio is at extreme highs more because of a lack of buying than a big surge in selling.

“This isn’t a call that a bear market is coming,” Vickers Insider Weekly analyst Jasper Hellweg said in an interview. Instead, he thinks it highlights that the market has little room for error and that stocks are increasingly vulnerable to the unexpected.

2. It is impossible to make market calls. In fact, it is so hard that you shouldn’t even try, wise investors such as Warren Buffett caution us. While market timing looks easy in hindsight, you have to get two decisions right, and that is not easy. There’s a good chance you will sell too early or buy back too late. “We view the signal as more effective as a near-term trading indicator than as a long-term investment strategy,” says Argus Market Watch, a sister publication to Vickers Insider Weekly.

What to do instead of selling

In other words, rather than “sell everything,” insiders may simply be telling us avoid chasing stocks here. In fact, investors should probably welcome weakness that will bring better entries. 

The odds seem higher now that we will get that kind of weakness, market analysts say. 

The recent volatility around tariffs and regional-bank news is a reminder of “just how stretched equity market valuations are, and how quickly investors’ moods can swing,” William Blair economist Richard de Chazal cautioned in a recent research note. “The market up to now has been unfazed at whatever economic and geopolitical woes have been thrown at it.” Investors have been reassured by big spending related to artificial intelligence, by Fed rate cuts and by strong earnings growth. “That scenario still looks solid for the time being, but will be increasingly tested,” he adds.

Likewise, Oaktree Capital Management co-founder Howard Marks recently cautioned that investors “should not expect much of a return” with valuations so rich. He told investors at the Cathay Asset Management Conference to take some profits and get more defensive. 

The biggest sellers

The biggest insider selling lately has been at popular technology companies that have done well. The selling has been greatest at Carvana, CoreWeave, Atlassian, Meta Platforms, Dell Technologies, Snowflake and Cloudflare.

For investors, it is important to note that insider selling at tech companies happens all the time, because tech managers and directors get paid in options and stock. Selling is how they collect their pay. Their selling is not, in itself, a sign that their stocks will pull back.

A few rare bright spots

Any insider buying that does happen in this environment seems particularly notable as a bullish signal. Hellweg singles out Zenas BioPharma, an early stage biotech company developing therapies for autoimmune diseases; CarMax in used-car sales; Agree Realty, a real-estate investment trust in the retail sector; medical-device company AngioDynamics; and Cullinan Therapeutics, another early stage biotech company developing cancer therapies.