Saturday, March 22, 2008

WTF Among the Materials Stocks?

In this series of posts, I ask the question, "Where's the Flow? (WTF)" for eight major sectors within the S&P 500 large cap universe.

Here I chart cumulative daily money flows (raw values; top chart) and a five-day moving average of money flow for five highly weighted stocks within the S&P 500 Materials sector. The money flow lines are plotted against the Materials ETF, XLB. The stocks included in the calculations are DD, DOW, AA, IP, and WY.

Note that five-day flows have oscillated around the zero level and tracked price reasonably well since August, 2007. We're neither seeing meaningful deterioration in money flows in this sector, nor seeing major accumulation of shares. Interestingly, we had a selloff in Materials stocks on Friday with the broad decline among commodities, but money flows were not negative on the day. This appears to be part of a broader pattern in which we're seeing higher lows in the cumulative money flow line (top chart). This may be suggesting a drying up of selling pressure within the sector.

In general, we've seen the best short-term buying opportunities in this sector when five-day flows have been negative. We are modestly positive at present. A break of the cumulative flow line above zero would suggest increased accumulation of these shares.


Money Flows for Dow Industrials Stocks