Some of that big money we've been monitoring for the past few months returned yesterday… to sell.
The stock market enjoyed a 10% rally from early July to early August. But during the rally, there was little buying enthusiasm from huge institutional investors like mutual funds, pension funds, and insurance funds. A healthy bull market can only take place with strong buying interest from these mega players.
Below, we look at the recent price and volume action in the benchmark S&P 500. As you can see, the S&P suffered several high-volume selling periods in May and June (A). The subsequent July rally was marked by tepid buying volume (B).
Now note the past few days of negative action, which came on stronger volume (C). The index also sliced through its 200-day moving average… a "line in the sand" many investors use to demarcate bull and bear markets.
Although we're eternal optimists here at DailyWealth, we can only interpret this "weak buying, strong selling" trend as bearish action. We'll need to see a big money buying rally before we change our view…
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