"Smart Money" Sold Stocks For Third Consecutive Week To Corporate Buybacks, Scrambling Shorts

Tyler Durden's picture

Last week, in the aftermath of dovish announcements by first the ECB and then the PBOC, the S&P500 jumped another 2.1% rising to its best level since early August.

But who was buying? We now know who wasn't: according to BofA "BofAML clients were net sellers of US stocks for the third consecutive week, in the amount of $1.7bn. Similar to in the prior two weeks, institutional clients, hedge funds, and private clients alike were all net sellers."

 Institutional clients have sold US stocks for the past eight weeks, and remain the biggest sellers year-to-date (in part hurt by the continued rotation out of active funds). Hedge funds and private clients have both sold US stocks for the last three weeks; even the one recently bright, private clients, turned sour and after having been net buyers of global equities, their buying waned in recent weeks. Large, mid and small caps all saw net sales last week, as was also the case in the prior two weeks.

The 4-week net buying, and lately selling pattern is shown below:

... and summarized in the following table:


Broken down by sector, the selling was broad-based: "Clients sold stocks in nine of the ten sectors last week, led by Financials. Tech saw the next-largest net sales, despite strong earnings results from the group last week. In addition to ETFs, only Health Care—which saw a late-week rebound—saw net buying by our clients last week. Clients have now bought Health Care stocks for the past two weeks; this sector has still seen the biggest net sales by our clients year-to-date. Industrials, Materials and Financials continue to have the longest net selling streaks by our clients (for the last seven consecutive weeks), with outflows coinciding with concerns over global growth and uncertainty over whether the Fed will tighten this year. Institutional clients, hedge funds and private clients were all sellers of stocks last week, and outflows were broad-based across size segments as well."


Some more details by sector:

Hedge funds were sellers of stocks across seven of the ten GICS sectors last week, led by Energy, Financials and Industrials. They also sold ETFs.

Only Tech (which saw strong earnings results last week), Consumer Discretionary and Telecom saw net buying by this group.

Institutional clients were broad-based net sellers of stocks across all sectors except Health Care last week, led by Consumer Discretionary and Financials.

ETFs saw net buying by this group, consistent with recent trends.

Private clients also sold stocks across most sectors last week, led by Tech and Consumer Staples (despite good earnings results from the former).

Only Energy and Telecom stocks, in addition to ETFs, saw net buying –consistent with recent sector flow trends for this group.


Actually, it was even worse: While traditionally Pension funds have been net buyers of US stocks in 2008, 2009, 2010, 2012 and 2014, even they turned sour on stocks into the torrid rally of the past few weeks:

Pension fund clients sold stocks last week after two weeks of buying; this was only the second time in thirteen weeks that they were net sellers. Net sales were led by ETFs and stocks in Staples and Tech. Discretionary, Industrials and Materials saw net buying. Net sales were driven by large caps, while small caps saw net buying by this group.

4 out of 4 sellers.

Putting it all together, here is the cumulative selling across the three main institutional client groups:


* * *

But if everyone was selling, why did the market surge?

Well, the previously documented price-indescriminate short squeeze shows no signs of abating, as more and more shorters are forced to cover bearish bets simply because other shorts are covering bearish best (something for which the "smart money" is most grateful as it provides a bid to sell into).

And then there were the buybacks. Remember how everyone said buybacks are in a blackout period? Well, they were wrong!

Buybacks by corporate clients accelerated last week, and while they remain lower than they were for much of this year (October has historically been a seasonally week month for buybacks ), they are tracking above levels we saw this time last October. Buybacks are on track for their second-biggest year since the crisis, following last year’s record.

And the detail: Corporate buybacks were largest within Consumer Staples and Financials last week. Buybacks in these two sectors were higher than the four-week average trends.


Summarizing all the above.

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Cognitive Dissonance's picture

Oh oh. What's it mean when the rats are leaving a sinking....er....rising ship? www.twoicefloes.com

Haus-Targaryen's picture

Looks like the idiot sheep and finance directors at publically traded companies are about to get fleeced.


Oldwood's picture

Institutions have nowhere to run. What are they going to do, go to cash or buy bonds with no yield? They must show gains or ELSE, so they will stay in till the end. But what the fuck do I know?

Sudden Debt's picture

First of all you should notice that Bank of America has suddenly been very communicative about the bad things for the last 2 months.

They're caught short while the market is rising.

And now they're advising their clients to sell hopeing that it will push the markets lower.

They're just like goldman likes to do, throwing their clients under the bus for their own gain.

My bet is that when they report their Q4 numbers, that they'll be terrible.

Remember: they are a bank and banks are not to be trusted. You shouldn't just repeat their words blindly.

Maybe you've forgotten but even in 2007 banks lied to the world. I don't understand why everybody suddenly starts to believe them with their track record.

If the magician makes you look to the right, you should be looking to the left to know what's happening or you won't understand what's comming.


XAU XAG's picture

The FED and Buybacks.......................are the only thing supporting the market

yogibear's picture

From the Federal Reserve's god..

Markets can remain irrational longer than you can remain solvent.

- John Maynard Keynes

yogibear's picture

Only when the US has a currency crisis that everyone will realize free markets have returned.

Until that time markets are rigged.

BandGap's picture

Selling into strength as the bottom falls out. What's the big deal?

ThanksIwillHaveAnother's picture

Is this the last gasp of the rigging or is QE4 at the doorstep?  3 Strikes???

NoDebt's picture

" Buybacks are on track for their second-biggest year since the crisis, following last year’s record."

I am comforted.

Oldwood's picture

Every entity is being herded. Some to safety and some to higher risk. Those who are paid to manage funds will stay in. Most, even the most conservative ones, are still seeking yield. They are under mandate to generate returns. Most retirement funds need 8% to stay afloat and the people working there will lose their jobs if that doesn't happen, so they are in...all in, till the end. Its all about yield and that is a quickly disappearing phenomenon. Chaos is like firing off a pistol in a herd of cattle. This is how rustlers were able to steal the herd although those trying to save their property as well as many of the cattle were trampled under hooves.

Everyone is being herded, actually more like stampeded, driven by fear. We will likely end up some place we really don't want to be.

yogibear's picture

Federal Reserve's Infinite printing and debt model in a finite world.

RiverRoad's picture

Eveyone knows that corporations buy back at market tops....  Look out below.

Not if_ But When's picture

If i'm following this right, then the "accepted explanation" of ZIRP raising the value of stock assets to generate any return on investment has been false for the last three weeks?  While the market has been skyrocketing upward?  If anyone can come up with an explanation outside of stock buybacks and NY Fed trading desk buying, I'd like to hear it.  This is some perilous sh*t going on.

chinoslims's picture

Stock buybacks.  Hahaha.  The corporations,will be left holding the bag on stocks bought with debt when this whole thing unravels

Oldwood's picture

And in a world of TBTF, exactly WHO is left holding the bag?

Vlad the Inhaler's picture

You mean the sucker shareholders, retirement accounts, and probably the taxpayer too.  The executives will most certianly NOT be left holding the bag.

Lady Jessica's picture

I am appalled, you guys.

That big chart is headed "YTD cum flows" and you've left it the lady to comment on this fact?

I thought the one thing that was certain about this place is that you were all teenage males living in mommy's basement giving the wrist a break between repeated bouts of onanism.

Now nothing is certain.

Oldwood's picture

You have a filthy, filthy mind.

You blend well.

PlayMoney's picture

Wrong Jessica. We're actually ADULT males living in the basement.....with the wrist thing.....many bouts 

wcvarones's picture

Outflows from the petro sovereign wealth funds?

Grandad Grumps's picture

Is this what the Fed would refer to as "preparing the market"? Retirement funds and pensions have been getting out of the bloated equities, such as techs (probably dot.com 2.0 names) and the only sector buying them are the hedge funds.

I think the Fed is trying to avoid being blamed for 401Ks becoming 201kks again and so they are dumping the future BIG losers on the hedge funds and private clients where they can be absorbed without so much publicity.

numapepi's picture

Stock buybacks are a form of embezzlement as far as I am concerned, and here is why...


SheepDog-One's picture

So 'shorts' are the most 'tarded money around then.....well I guess by recent hindsight they appear to be, that is if we accept the narrative that they just always hold shorts going down and always scramble to cover at any price when they get yanked back up. I for 1 don't buy the narrative. FED is buying up stawks.