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Institutions Dump Stocks For Fifth Consecutive Week; Record Selling Capitulation Hits Industrials
Over the past month (and year) the market may appear rangebound driven mostly by a handful of top stocks, but below the surface the "smart money" continues to sell.
According to Bank of America last week, during which the S&P 500 was essentially flat, BofAML clients were net sellers of $1.3bn of US stocks, following two weeks of net buying. Net sales were led by institutional clients, who have sold US stocks for the last five consecutive weeks. Hedge funds were also net sellers following two weeks of buying, while private clients were the sole net buyers. Private clients have bought US stocks in four of the last five weeks, and net buying by this group last week was the biggest in two months (chiefly due to ETFs).
But while the traditional "smart money" marginal buyers may have said enough especially after the Draghi debacle, the traditional source of stock demand remains as buybacks by corporate clients picked up last week, and the four-week average trend is tracking slightly above levels we saw this time last year.
As the chart below shows, while Private Clients have been small net buyers of stocks in 2015, hedge funds are net sellers but nothing compares to the revulsion by big institutions whose selling has been relentless.
And while the non-buyback activity last week was broadly negative, one sector saw what may have been its capiulation moment: industrials, where selling just hit record levels.
Clients sold stocks in eight of the ten sectors last week, led by Industrials and Materials. Commodity-oriented sectors have seen a consistent string of outflows in recent weeks, which could continue given OPEC’s decision on Friday. Materials has seen net sales for the last thirteen weeks, while Energy has seen eight weeks of net sales. Industrials has seen net sales in eleven of the last thirteen weeks, and net sales of this sector last week were the second-largest in our data history (since ‘08) and the largest since mid-Sept. Sales of Industrials were chiefly from private clients (whose sales of the sector were the largest in our data history—see chart below), in a week full of downgrades from our Industrials analysts on numerous railroads, truckers and machinery companies. Meanwhile, net buying of Financials last week—a week which ended with a better-than-expected payrolls number that, in our economists’ views, supports a December rate hike—was the largest in three months. Staples and Tech stocks also saw net buying, while ETFs saw the largest inflows.
Some more details by client type.
Hedge Funds:
- Hedge funds net selling was led by Health Care and Consumer Discretionary last week. Net selling of Health Care was a reversal from recent trends for this group.
- ETFs saw the biggest net buying from this group, followed by Industrials stocks.
Institutional Clients:
- Institutional clients were net sellers of stocks in seven of the ten sectors plus ETFs last week.
- ETFs saw the biggest net sales, followed by Discretionary and Materials stocks.
- Staples, Health Care and Financials saw net buying by this group.
Private Clients:
- Private clients’ net buying was led by ETFs (as is also true on a four-week average basis); their purchases of ETFs were the biggest since January and the fifth-largest in our data history.
- Financials, Tech and Discretionary stocks also saw net buying by this group.
- Net sales were the largest in the Industrials sector (biggest net sales of Industrials by private clients in our data history).
Corporate Clients:
- Corporate buybacks were largest Tech and Staples last week, with Tech buybacks picking up relative to recent trends.
- Meanwhile, Financials buybacks have decelerated relative to their four-week average trend.
* * *
Some other notable flows:
- Mid-caps saw net sales by institutional clients, private clients and hedge funds alike last week, with net buying of mid-caps by our clients the largest in eight months. No size segment saw net buying by all three groups.
- Materials and Utilities saw net sales by all three client groups last week; no sector saw net buying by all three.
- Pension fund clients sold stocks for the fifth time in six weeks, after the prior week’s net buying. Net sales were chiefly due to ETFs and Discretionary stocks. Financials and Health Care stocks saw the biggest net buying. See pg 9 for details
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why would you sell health care stocks.
Our premiums just went up 19%. It's government enforced fascism. Those "care" providers can't lose money if EVERYONE is forced to pay whatever price they set!
Holy shit, 19 fucking percent after going up $2200 last year alone.
They'll drop too.
why would you sell health care stocks
Everyone I know is paying the fine.
Let the show begin. I have my pop corn ready.
All I've got left is stale and moldy popcorn from every time I popped it thinking "this is it."
Does "institutions" include the Fed? If so, they're not buying fast enough to cover all the selling.
Long popcorn.
and My can food is starting to rot.
Next bailout contender in my opinion>
You're supposed to be buying stocks, not selling before the first rate hike. Get with the program fool. - Mama Yellen
46% increase - 2 consecutive years!
Fuck that...
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remember when druckenmiller & chanos got laughed by CNBC anchors for shorting CAT at 120 (spot = 66.61 x .81)
good times
oh, and when cramer said the bottom was in for oil in the mid-40's (spot = 36.95)
good times
and now cramer saying the dividend story going way for MLPs (think i remember him pitching them once or twice or a hundred times the last few years) ... "but don't worry, there's 7-8% yield!" ... "but the stock got cut in 1/2" ... "but don't worry, theres yield!" ... "but is that yield safe?" ... SILENCE
Cramer is all over the news feed at Yahoo. I think that's why Yahoo has been going down the toilet for a decade now.
ALWAYS, ALWAYS, ALWAYS do the opposite of what the Anti-Oracle of Wall St. says to do.
aliki, your observations are good. But why do you even know what Cramer is saying? ;)
get ready to btfd. that is all.
Big Guys hanging out by the exits while mom and pop investors will get the shaft again. In the words of the late great George Carlin "It's Big Club and YOU AINT IN IT'' I don't know if he was a Zerohedger but he would have been a good one.
My long treasuries pay interest and whenever there is a stock market sell-off, a flight to safety or the FED does QE, then I get EVEN LARGER capital gains.
I am in AWE at how much capital gain I already have on my treasury portfolio - anytime I want a little high, I just look at my brokerage gains position - love it!!! :-))
^^^
one of the smartest trades of the past 5 years. just be careful tho, a president trump might have the balls to do what needs be done (a massive restructure of our debt and that would SLASH the principal). unless/until that happens, treasuries still a great trade. even-if she raises rates this year, id be willing to bet the nee-jerk reaction is rates pop, then drop.
"YTD cum flows"?
WTF? is this ashleymadison 10-K?
Glad I wasn't the only one who read that. Damn near shot my breakfast across the room laughing hysterically.
Looks like the quant is right
This is just the chaffe off the wheat barg falling, give it time.
Every Edward Jones rep in the US:
"Hello Mr Honeycut, I received your voicemail about your Mutual Fund positions -"
"Did ya shitcan 'em yet?"
"We'll put the sale order through but they won't sell until close of market today."
*heavy swallowing sound*
"So Mr Honeycut, for my records, would you mind telling me why you're selling today?"
"Are you lookin' at the same charts I'm lookin' at?!"
"O-okay, more risk averse -" *click* *dialtone* "Mr Honeycut? Hello?"
If everyone is selling, who is doing the buying to keep the market propped up? The Fed ?
Audit the Fed NOW !!!
If that is so and the indexes are still at all time highs, I would say that is extremely bullish.
Stock prices have already tanked and they can keep the index at these levels??
Then follow the moving average......if above buy, if below sell.....screw these awful facts.....trade what you SEE. No reason to anticipate if you don't have several trillion in AUM.
Trade what you see.
If you don't like stocks, trade forex. Open all the time, liquidity and use a stop. Harder to manipulate....not impossible....harder. Way harder.