Saturday, May 31, 2008

Stock Picking With Money Flow Data

The previous post took a look at money flows across the ten most highly weighted stocks within the technology (XLK) and energy (XLE) sectors. I also showed that, by aggregating the most highly weighted stocks across the sectors, we can also arrive at estimates for money flowing in and out of the S&P 500 Index as a whole.

Instead of aggregating the money flow data for each stock to derive estimates of flows across sectors and indexes, we can compare the flows for stocks within sectors to see which issues are attracting buying and selling interest.

For example, within the technology sector, we see net inflows over the past 20 trading sessions for CSCO, AAPL, INTC, GOOG, and ORCL. There are net outflows over the same period for T, MSFT, IBM, HPQ, and VZ. Interestingly, as a whole, the NASDAQ-related technology issues tend to be sporting more sizable inflows; the NYSE-based issues are displaying outflows.

Within the energy sector, we're seeing notable inflows to RIG, XTO, and HAL. Considerable outflows are evident within XOM, CVX, and COP. Here we see the largest cap energy issues--and those most highly weighted within the index--displaying the greatest selling interest.

By comparing flows for stocks within sectors, we can identify potential sub-sector themes and aid the process of stock picking.