Macronomics highlighted some interesting fund flow statistics from the BoAML's client flows. It seems that institutional investors have been consistent size sellers of equities; while hedge funds had been sellers since late last year but have recently started to buy; and individual investors have been buying stocks like they were Black Friday door-crasher specials. Bear in mind that when institutions change direction, they move glacially but the move tends to be long lasting, while hedge fund and retail investor money tends to be much more nimble.
Other data sources have confirmed the individual investor stampede. TD Ameritrade maintains an Investor Movement Index (IMX) which measures individual investor activity. While the latest numbers are only to the end of March and the April figures will not be updated for another week or so, the readings from IMX also confirm substantial net individual investor buying. March 2014 IMX levels are now at all-time highs since the inception of the index and, if the BoAML data is accurate, April will show further highs indicating more buying.
High margin debt by itself isn’t bearish. In fact, new highs in margin debt usually have marked very strong stock markets (think the past 12 months). The catch is once margin debt is high and it ROLLS OVER, then you better start to worry.
The latest observation shows that margin debt has started to roll over:
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