Question:

How does one follow the institutional money flow??????

Curious from Complexville

Answer:

As usual, the answer to this question is complex, but understand this simple reality – in times of financial worry, large institutions and wealthy investors move their money from higher risk to lower risk investment vehicles. Institutional money-market funds collect much of this money because of their low risk. When these investors become less risk-averse, the money moves back to higher risk vehicles, such as the stock market.

One source for the total amount of money residing in institutional money-market funds is the Investment Company Institute. This company tracks the flow of money in and out of the institutional money market funds, and the report it puts out breaks down the movement into several helpful categories.

When the money is on the move from low-risk vehicles, look to the COT Report – Commitments Of Traders, published weekly by the Commodities Futures Trading Commission to deduce where it might be headed. One can track what the “smart money,” (commercial futures traders) is doing and thus get clues about future direction of specific markets, such as the S&P 500. From this, one can “forecast” direction in the overall stock market. Common thought on this is that these actions lead the market by about three weeks.

Some traders develop proprietary software to deal with the public data and then project forecasts for the overall market and specific sectors. Thus, locating specific web sites that deal with this flow of money is another way to track this.

I have found that following analysts that track this flow is the easiest path to follow. You can find these analysts in just about any reputable financial medium, such as CNBC, Forbes, and Bloomberg, to name just three.  

Trade in the day; invest in your life …Bloomberg

Trader Ed