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April 29, 2009

Will Institutional Investors Kill the Rally?
by Marty Chenard

As you know, we track how much Institutional Buying and Institutional Selling occurs everyday. We also track what is happening to the net value of the "core holdings" held by Institutional investors.

The Institutional core holdings represent the majority of the money invested by Institutional investors, and since Institutional investors account for over 50% of the market's daily volume, this becomes an important group to track.

What the Institutional Index is showing now ...

First note the triangular pattern that started last September and broke to the downside in February. That produced a sharp down movement in market that bottomed out in early March.

From there, the Index of Institutional "core holdings" have been exhibiting an upside rally. (The horizontal orange line marks the July 2002 Bear Market low.)

But ... notice what is happening now: The Institutional Index has made NO progress since April 2nd. Yesterday, it closed very close to April 2nd.'s close.

Now ... look at the circle I drew. The inside of the circle contains all the highs since March and acts as a resistance line.

Is it possible that the action of the last 18 days is just a consolidation?

The peak amount of Institutional Buying occurred during the 4th. week of March. That is when the Index first peeked over the triangle's resistance line, AND the 2002 (orange) resistance line.

Since then, the amount of Institutional Buying has steadily decreased. On the other side of the equation, after considering the amount of daily selling, they are still in net Accumulation.

Staying in Accumulation will keep the Index positive and above the 2002 resistance, but the net Accumulation is continuing to decrease. It is not a problem yet, but if the current "trend of decreasing Institutional buying" does not cease, the Institutional Index and the other market indexes will see their rallies die off.

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Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

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