Saturday, October 04, 2008

Money Flow Update for October 4th

When I looked at the Wall St. Journal data, I was a bit surprised to see that money flows into the Dow Jones Industrial stocks were positive on Friday, despite our move to new price lows. I then calculated my own numbers and found the same thing. Indeed, as we've moved lower over the last few days, we've actually seen positive dollar volume into the Dow stocks (see chart above).

I still was skeptical, so I examined money flows for each Dow stock over the past week. Interestingly, only 13 of the stocks showed dollar inflows and 17 displayed outflows. The overall number was positive because of unusually large dollar inflows into a few stocks: most notably GE, C, JPM, PFE, and T on Friday.

One day does not a trend make and, as my upcoming indicator review will note, the recent weakness has rendered meaningful technical damage to this market. Still, I find it interesting that large market participants were lifting offers for such weak stocks as GE, C, and JPM in the wake of the passage of the rescue program.


nan said...

Dr Brett,

Looking at your indicator I see a big divergence between the money flow and the price level. Do you have any kind of data that tells you what happen in the market after divergences like this??

Thanks. Hernan

smtrader said...

Dr Brett,

There is also divergence on the OBV for the SPY, SDS, DIA and DXD.

Red Hue said...

Divergence is very tricky...if price moves up from here then it has meaning...otherwise it does not. (the Yogi Beara of trading)