Is The Little Guy Telling Us Something?
Often, due to a lack of
information, the average
retail investor is the last to participate in
financial market trends. As a result, many seasoned investors
and traders refer to the broad flow of retail financial capital as a good
contrary indicator…
Equities
Last week, the Investment Company Institute, which
tracks mutual fund flows, released its January figures for mutual fund flows.
The results indicated that investor redemptions in equity funds continued in
January. The report is significant, however, because it was the first January
since 1990 that investors pulled their money out of equity funds. Equity
funds usually experience net inflows in January, as it is typically a big month
for retirement vehicle asset allocations. And this outcome highlights the extent
of investor bearishness in the equity markets.
Bonds
At the same time, investors are becoming
increasingly bullish of the bond market, as their allocations to bond funds
jumped 74% in January. This current investor enthusiasm for bonds isn’t too
dissimilar to their enthusiasm for equities a few years ago. Perhaps a quick end
to all of this geo-political uncertainty will be what the stock market needs and
the bond market doesn’t need. Could there be a bearish divergence developing for
yields in the 10 year Treasury weekly charts?
It looks like the yield will retest its lows at
3.559 but the MACD and histogram are no where near their lows.