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Watch the Block Trades

Posted By Barry Ritholtz On March 16, 2006 @ 7:30 pm In Investing,Markets,Technical Analysis | Comments Disabled

While the S&P 500 ETF (SPY) has inched towards multi-year highs, block money flow — a gauge of net institutional buying and selling activity — has fallen off a cliff since mid-January , suggesting the U.S. equity market is on shaky ground.

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click for larger chart
Spymoneyflow [1]
Source:  Mike Panzner [2], Rabo Securities USA

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I would add that unless institutions come crashing back in, this is yet another data point that confirms the topping process . . .

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UPDATE:  March 17, 2006 5:42am

Its not the raw fall off in block trades that is revealing, but rather, the divergence versus the market direction that is significant.

Why? Block trades may reveal what is driving the market in a given rally. Is it Institutional Buying, which tends to be measured and longer lasting as buyers scale in over time.  Or, is it retail investors?

Institutional buyers tend to be part of longer lasting trends . . .


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[1] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/spymoneyflow.png

[2] Mike Panzner: http://www.amazon.com/exec/obidos/ASIN/032124785X/ref=ase_thebigpictu09-20/102-4529470-0078540

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