The S&P 500 is regarded as a good measurement of the economy by many investors. The reason, is that it represents
some of the best stocks with the widest representation across many different sectors.
At the other end of the spectrum, are the Institutional and "core holding stocks" that are in their portfolios.
As a group, this can be expressed as an Index as seen below.
Comparing the S&P 500 and the Institutional "core holdings" ...
The movement of the Institutional core holdings, is an index measurement that we look at every day. Since Institutions
account for over 50% of the market's volume, this index gives us an idea of the support the Institutions are giving
the market ... or lack of support.
Below, I plotted a line chart for the S&P 500 and the Institutional core holdings. Note how they both took off in
rally mode last July. Then, something changed in December ...
On each chart, I drew a trend line from December 15th. to the closing point as of yesterday.
What do you observe?
The S&P 500 has trended higher, but the Institutional core holdings has pretty much moved sideways. So, we have
a divergence between the actions of Institutions and the average investor in the market.
While the average investor is accumulating more stocks, Institutions have gone "neutral" and are not buying
much more of the core holdings that they already own. This also means that Institutions are supporting the market
less and letting smaller investors carry the weight of keeping the rally going.
The good news, is that Institutions are not selling much. The bad news, is that Institutions are buying much either.
They are standing in a neutral position.
This has some investors concerned about what they will do next. Will they let the market run up further and
sell into it? Will they kill the rally by aggressive selling and profit taking? Or will they get excited again and
start another buying spree that would send the market higher?
It is not clear why they have gone to a neutral position. One thing is clear, that such divergences can only
go on so long before conditions revert back to a state of balance.
Source: http://www.StockTiming.com
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