Institutional Investors Are Still In Net Accumulation, But There Is A Negative Divergence
Institutional Investors are the "big guys" in the stock market. It is because they represent over 50% of the daily trading volume on any given day.
So, it matters what they are doing. And ... it is important that investors not go against what the Institutional Investors are doing.
On September 3rd, Institutions went from Distribution to an Accumulation stance and the market has been in a rally since.
As of yesterday, they were still in Accumulation with the market much higher than it was on September 21st. I picked that date (Sept. 21st.) to mention, because that was the day Institutional Investors reached their peak Accumulation level for this rally.
*** Take a look at today's chart which shows the current level of Institutional Accumulation. It is nice and high, with one issue ... and that is a Negative Divergence relative to the NYSE (NYA) Index.
Sometimes, these negative divergences produce a volatile up trend in the stock market like the July to December 2009 time period.
Other times, like the February to April 2010 time period, a negative divergence in Institutional Accumulation leads to a correction.
We can't tell you which one this turns out to be just yet ... other than this is now a caution about market behavior being close to changing.
It is important to note however, that there is one thing that could change this "negative divergence" condition, and that in a continuing rise in the amount of daily "inflowing Liquidity" the market has been seeing.
Yesterday's inflowing Liquidity reading had a small down tick, but it was still in high Expansion territory.The Accumulation's negative divergence will NOT become a problem unless Liquidity starts to show outflows in the market. For now, this means that both inflowing Liquidity and Institutional Buying and Selling action should be carefully watched.
(Reference note for paid subscribers: Liquidity and Institutional charts relating to the above can be found every day in Section 4, Charts: 6, 7, 8-1, and 8-2.)