Mutual Fund Flows – Inverse Indicator
Notice that mutual fund flows are an inverse indicator for every major high and low in the stock market. No, the timing is not perfect every time. However at every major high and low, I bet that month the flows are inversely correlated in size.
-In May 2008, flows were strongly positive and the market peaked and crashed the rest of the year.
-In October and November 2008, flows were very negative and the market bottomed ahead of a large 2 month rally.
-In January 2009, flows were positive and the market sold off hard till early March.
-In March 2009, flows were negative and the market bottomed and rallied.
-In April and May 2009, flows are once again strongly positive. Hmmm, what’s next?