At the end of last month we noted [2] that stocks were entering a dangerous period: the "buyback blackout" that surrounds earnings. As we've documented exhaustively, stocks have benefited handsomely from the corporate share repurchase bid and so in the absence of demand from cost-insensitive corporate management teams, and with households and institutions both selling as outlined here [3], the following chart, which shows that equity flows are aggresively negative, comes as no surprise. Having said that, stocks are at record highs begging the question: "who is buying?"
From BofAML:
Big decoupling in recent weeks between US equity flows and prices (new highs today –...correction risks will grow in absence of fresh inflows in coming weeks.
[4]
We might ask the following: is there someone (or some central planning agency) out there buying ES [5] or spoofing to push the market higher without ever actually buying anything? One never knows — perhaps Kuroda's plunge protection [6] is now operating outside of Tokyo.
