Saturday, March 22, 2008

WTF Among the Industrial Stocks?

In my most recent post, I tracked the money flows in the Materials sector of the S&P 500 stock universe. Above we see the cumulative raw money flows (top chart) and five-day average flows (bottom chart) for five highly weighted industrial stocks. These are plotted against the Industrials sector ETF, XLI. The five stocks included in the calculations are GE, UPS, BA, UTX, and MMM.

Note that the flow patterns for the Industrials sector look very different from those seen among the Materials stocks. Cumulative flows have been in a steady downtrend (Friday's strength notwithstanding), indicating a flight of funds from these issues.

Five day flows are currently positive--something we haven't seen often since August, 2007--and the sector index has so far held above its price lows from January. We'll need to see sustained buying (positive flow figures), however, to conclude that the recent bounce is anything more than short covering.