Research Excerpts

Money Market Flows & Stock Market Direction

Posted on: Friday, May 17th, 2013

The following is one of the 15 charts and corresponding commentary/analysis/strategy from our May 16th Investor Sentiment Survey report (access requires subscription, click here to view a sample report).

Investor Sentiment Survey, one of 8 different reports that we produce for subscribers, is a monthly report that displays and analyzes a broad list of both asset flow- and survey-based measures of both professional and retail investor sentiment and discusses their directional implications for the major areas of the US financial markets including US equities, US interest rates, the US Dollar, and economically-influential commodity prices.


Excerpt From: Investor Sentiment Survey
Asset Class: US Equities
Topic: Money Market Flows
Date: May 16th, 2013

Chart 2 measures investor sentiment according to near term money market flows by measuring the velocity of investor assets moving into and out of the Rydex Money Market Fund (RYMXX).  The blue line in the lower panel plots the daily percentage that the assets invested in RYMXX have moved either above or below their 50-day moving average since 2011, with a corresponding chart of the S&P 500 plotted by the black bars in the upper panel.

SS-2Chart 2

The green arrow in the lower right edge of the chart points out that investors are just starting to retract from an historic most fearful extreme according to this metric, which suggests a recent defensive rush of investor assets into the money market — presumably in anticipation of a corrective decline in US equities.

The other green highlights show that, as a contrary indicator, previous instances of a retraction from these most fearful extremes have coincided with or led most every near term bottom in the S&P 500 in recent history

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