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What Leads The Market Now?

Institutional Buying and Selling, or the Inflowing Liquidity levels on Options?

This was an interesting question brought up by our research department, so we explored the question by comparing the Inflowing Liquidity data on Options versus the daily Buying and Selling levels from Institutional Investors (Institutional Buying and Selling data can be found on the second graph from the top in the posted chart below).

As it turns out, the Inflowing Money on Options is a step ahead of how Institutional Investors are reacting to the market conditions. The Timing Indicator in the top graph is a good summation of the activity of the Inflowing Liquidity levels and the bias levels on Options.

Here is what we found: When our Options Timing Indicator has the thick red/blue trend lines cross over, AND the fast (thin red) indicator crosses above the blue horizontal signal line at the same time, then there is an upside signal.

If you look at the chart, we have had 4 since March and all of them had nice upside runs. We almost had the fast red indicator move above the blue signal line yesterday, but it didn't quite make it, so we need to measure its progress again tonight.

Institutional Buying and Selling Chart


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