Sunday, September 21, 2008

Money Flow Update for September 21st

The last update on dollars flowing into and out of the stock market found that flows were consistently negative, suggesting that bounces represented short covering and sector rotation, rather than a fresh influx of buying. Since that time, we saw funds flow sharply out of the Dow Industrial stocks early this past week before turning positive on Thursday and Friday. As the four-day moving average of money flow from the above chart shows (pink line), moves into positive territory have been short-lived during the recent market decline. We now need to see if the influx of buying from Thursday and Friday can be sustained.

Note that the four-day average money flow is still in negative territory. While the buying from the last two days was impressive, it was not as pronounced as the degree of selling from early in the week. Over the past week, 16 of the Dow stocks show dollar inflows, 14 show outflows. This fits with the sector performance data I recently presented: there continues to be more evidence of sector rotation than across-the-board buying. This will need to change, I suspect, to sustain a bull market move.

P.S. - Stocks with notably positive money flows this past week include AA, CAT, DD, GE, HPQ, JNJ, JPM, MCD, MMM, PG, UTX, and VZ. Notable outflows were seen at MSFT, XOM, WMT, MRK, KO, IBM, BA, and C.