While the stock market has dropped recently on fears of a European debt contagion, an interesting thing has been happening behind the scenes. The chart above shows non-block vs. block trades flowing into equities. Non-block trades are trades that are 10,000 shares or less and are a good indicator of whether the retail investor is buying or selling stocks. Conversely, block trades are trades over 10,000 shares and usually are trades by institutional investors and money managers. As the chart shows, over the past month retail investors have been selling stocks. At the same time, while the market has dipped, institutions have not stopped buying, and in fact they have increased the amount of buying over the past few weeks.
What this means is that institutional investors are generally bullish on stocks. They see the recent downturn as a buying opportunity, not an indication of a "double-dip" recession or another serious downturn in the economy. Institutional investors can see the long-term value of stocks at these levels and are clearly buying them up left and right.
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Posted on Thursday, May 20, 2010 @ 3:21 PM
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