Sunday, February 08, 2009

A Look at Money Flow: Significant Buying at the End of the Week

Money flow for the Dow 30 stocks turned positive for the week on Friday's rally. (See last week's money flow post for an explanation of the indicator and a review of its recent behavior). As we can see from the chart above (click for detail), the steep jump in money flow at the end of the week brought the cumulative flow line to within hailing distance of its 2009 highs. A break above that level would be significant.

In my prior post, I noted that recent flow values were muted. Because money flow is a volume-weighted statistic, low flow numbers suggest diminished institutional participation. Friday's jump in Dow flow of over $500 million was the largest move in the indicator since November 21st. That day represented a leap from the November lows and led to a sharp rally. I will be watching the market's follow through closely early next week for signs that institutions are losing some of their risk aversion and committing capital to equities. As always, money flow numbers will be posted each morning prior to the market open via Twitter (free subscription via RSS).