Are Institutional Investors Buying or Selling Now? by Marty Chenard

Everyday, Institutional Investors buy stocks and they sell stocks. If they buy more then they are selling, then they are in Accumulation. If they sell more then they are buying, then they are in Distribution.

Which mode they are in matters a lot, because over 50% of the stock market's volume comes from the action of Institutional Investors.

Today's chart explanation: The red mountain chart represents the amount and trending of Institutional Selling activity. The blue line represents the amount and trending of Institutional Buying activity.

If the blue line is above the red mountain chart, then there is more buying than selling occurring and Institutions are therefore in Accumulation. If the red mountain chart is higher than the blue buying line, then there is more selling happening than buying and Institutions are in Distribution. And ... because they do more than half the trading in the stock market, the market indexes follow their actions. Note the correlation between the Institutional activity and the NYA Index below.

So, what are Institutional Investors doing now?

First, the Institutions had an Accumulation "Buy/Sell cross over" on March 13th. They have been in Accumulation since then, and the market has trended up since that time.

Second, notice how much buying Institutions have been doing during the past few weeks. The Buying is becoming less and less. There is still a lot more buying than selling going on, so Institutions have remained in Accumulation ... but doing less of it. So what that says, is that Institutions are buying less as the market is being driven up by smaller investors. If the selling trend reverses to the upside, then Institutions will start to take profits and sell into the market.

The 2002-2009 section of the chart to the immediate left shows how seriously the stock market has been really hit. Note that the drop from the peak has been extremely dramatic with the Institutional Index falling well below the lows of the 2002 Bear Market.

Now, took a look at the "close up" in the upper left hand corner. Yesterday was an important level the our Institutional Index ... it closed right on the support line for the July 2002 Bear Market Low.

This is no ordinary level ... it is an extremely important "test level" for the Institutional core holdings. If it cannot hold this level, all the other major stock market indexes will also run into trouble.