Wednesday, February 28, 2007

How Did Money Flow During the Market Decline?

I mentioned recently that, throughout this bull market, it was rare to see a day in which net funds had flowed out of the Dow 30 stocks. As I was going through my market stats at the end of Tuesday's sharp decline, I noticed that the TIKI (the net number of stocks trading on upticks minus downticks for the Dow stocks) was actually positive on the day. This was in marked contrast to the NYSE TICK (which tracks the net upticks minus downticks among all NYSE-listed issues), which was quite negative on the day. Could it be, I wondered, that investors were putting money to work in safer, blue cap issues during the market decline and shunning more volatile, smaller stocks? That would certainly fit with the risk-aversion theme associated with the drop in China and the rise of the Yen.

I examined the Dollar Volume Flows into and out of each of the Dow stocks and indeed found that the Dow attracted net dollars on the trading session. Far and away the net money flow winner was XOM, followed by T, GE, and IBM. Stocks with net outflows on the day were paced by a stock that has seen outflows for a while: MSFT. Other stocks with outflows on the day were PFE, WMT, KO, JNJ, INTC, DIS, HON, GM, DD, CAT, C, and AIG. Of these, the first six have also had net outflows over the past several weeks.

What it looks like from this angle was that traders were putting their money into some old-line safe names--most notably an oil stock--and taking further money out of stocks that were already out of favor. Overall, however, there may have been less of an institutional exodus from large cap stocks than is apparent from the Dow chart.