Does the Stock Market Follow Institutional Investor Selling Activity?

Let’s plot data to see if Institutional Investors are responsible for the Stock Market’s direction.

On the top of this chart is the NYA Index and on the bottom is the trending of daily Institutional Selling Activity. Basically, when the red line is trending over the blue line, Institutional Selling is increasing and the market is going down. Opposite to that, when the red line is trending below the blue line, Institutional Selling is becoming less and less so the stock market goes up.

Why is that?

Because Institutional Investors own and control so much of the stock market, that what they do in mass dictates what happens to the stock market.

There is increasing and decreasing Selling, what about sideways action?

If you look at the Institutional Selling part of the chart, you will see sideways movement for the Institutional Selling activity (see the rectangles labeled A and B.)

If there is a correlation in the sideways movement, then the NYA Index will also show sideways trending during those time periods. After looking at the same areas on the NYA Index, you can can see that the NYA also moves in a sideways pattern.

The conclusion?

Never fight against what Institutional Investors are doing.