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The Net of Institutional Buying/Selling...

Tuesday, October 21st. 2008- Stock Trends, Charts, and Commentary

What is one of the important events occurring in the markets right now?

Today, we will once again share one of our paid subscriber charts.  This time, it is a look at the
Net
of Institutional Buying and Selling
on a daily basis.  We have discussed many times how Institutional Investor have a major control and say in the market's direction.  What is the reason?  It is because they control a majority of the trading volume each day. 

The Net of Institutional Buying/Selling takes how much Institutions bought minus how much they sold on any given day.   That tells you if they are in Accumulation or Distribution.  Obviously, when they are in Distribution, the stock market moves down ... and this you can clearly see on today's chart.

But, what if they are in Distribution, but the rate of Distribution is decreasing at a rate where the distribution trend is becoming less and less? 

That is what is happening now.

This indicates that ... while still at a net distribution level, they are starting to buy more and sell less. 
It is not a prescription for a bullish rally, but it is the necessary ground work necessary for a foundation to be created if one is to happen.

And ... that is what the chart below is saying right now.  Institutions are in Distribution, but on a trending basis, it is becoming less and less.  That suggests that they are trying to halt the market's downside direction, and if this chart continues to trend at this rate and this direction, then Institutional investors could very well try to initiate an upside rally. 

Can they pull it off?  Yes ... if foreign investors don't use this as an opportunity to bail out That is what happened to Wachovia when it became clear they were in trouble.  Sources told me that Foreign investors rushed in to sell bonds that Wachovia had sold ... and that created a serious redemption problem. 

Is there anything else Institutional Investors might be worried about right now?  Yes ... sources have told me that there is supposed to be a Lehman CDS sale or auction tomorrow.  The concern is that the if the CDSs sell for too little, is will set a very bad market value for other market CDSs which will have to be sold off later.

While Institutional investors may be trying to make a positive difference in the market, I am hearing some people speculate that it is out of fear for the financial tax disadvantages they think they may face if their candidate of choice is not elected.  I don't, and won't discuss politics because that is not what our mandate is.  From time to time, some things I point out may or may not coincide with the political landscape ... I leave that for you to decide.

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