U.S. corporate bosses are likely to sell more of their companies' stock through the end of the year, but that does not mean stock prices have topped.

Insider selling recently hit its highest level in more than a year. Conventional wisdom says it's time to sell when corporate leaders start cashing in on gains as it signals a lack of confidence with the corporate outlook, but in the wake of the 50 percent decline, that expectation may be incorrect.

Executives have sold personal holdings in the last few months for other reasons, analysts say, including cash-flow problems following the wipeout in equities, tighter credit conditions and a desire for greater diversification.

"Under the circumstances you need to be a little bit skeptical of the numbers," said Scott Marcouiller, senior equity market strategist at Wells Fargo Advisors in St. Louis. "These guys took some major hits."

Insiders sold $6.2 billion worth of shares in August, the most since May 2008, while insider buying has been under $1 billion for seven straight months for the first time since 2005, according to a report by research firm TrimTabs.

Because insiders cannot trade around earnings season, insider volume at $3.6 billion in October was about half that in August, but the actions of executives at many companies that have reported suggest selling will pick up.

A Goldman Sachs finance executive sold $3 million in shares shortly after the company posted better-than-expected third quarter results in October

Tupperware Brands Corp's chief executive, Rick Goings, along with five other insiders, sold $10 million worth of stock after the company beat third-quarter earnings estimates in mid-October.

Insider selling has been a more reliable indicator of trouble at a specific company than as a market barometer. May 2008, the last time insider selling was at comparable levels to this summer, was a good time to sell, even though it was several months after the October 2007 market peak.

MANY REASONS TO SELL

Ben Silverman, director of research at Insider Score, a company that tracks trading by insiders, says many factors can muddy the bigger picture when trying to draw a conclusion from insider selling.

A percentage of selling volume is made up of options on the company's stock which are usually sold because of they are about to expire, rather than because of fundamental views on a company or the direction of the market.

Many directors and executives have existing programs that automatically result in sales on a monthly or quarterly basis.

Sometimes, directors with a seat on more than one board might sell shares in one company to meet a margin call on money borrowed against the shares of another.

After the shock of seeing large chunks of their wealth destroyed during the crisis, corporate insiders may be starting to diversify, selling some holdings in their own companies, upon which much of their livelihood depends.

"Any financial adviser will tell you don't have your money in any one thing, yet many of these CEO types do just that," said Robert Auer, senior portfolio manager at SBAuer Funds in Indianapolis, Indiana. "They probably had a little change of heart."

Overall, data going back six years shows insiders have been far better at calling the bottom of the market than the top, says Silverman. Most investors look at insider selling as a bearish signal if there are other bearish indicators backing it up.

"There is a better correlation when there is a lot of insider buying," he said. "They perfectly called the market bottom in March of this year."

The uptick in insider selling started in April, and those using that as the barometer would have missed most of the 2009 rally.

(Reporting by Edward Krudy; Editing by Kenneth Barry)