Thursday, March 26, 2009

Does End of Day Strength Mean the Big Boys are Buying?

Interesting take from Bespoke today, as reported at Bloomberg online.

U.S. stocks have their best intraday returns starting at 2 p.m. in New York as institutional money managers begin buying, according to an analysis by Bespoke Investment Group LLC.

Since September, the Standard & Poor's 500 Index has on average risen only during the 2 p.m. and 3 p.m. hours in New York, said Bespoke, a Harrison, New York-based firm that manages money for wealthy investors and provides financial research to institutions. Returns were 0.14 percent between 2 p.m. and 3 p.m., and 0.05 percent from 3 p.m. through the close. The worst performance was between the previous close and 10 a.m., according to Bespoke.

“This could be a sign that the institutional money has been doing a lot of buying,” Bespoke co-founder Justin Walters wrote in a report yesterday. “It’s a common belief on Wall Street that the institutional money (smart money) trades at the end of the day, while the individual money (dumb money) trades at the beginning of the day.”

This has been particularly true in this bear-market rally. We've seen strong buying into the close. This might mean more and more hedge funds and the like are buying. This is a good sign. Although the rally is feeling a bit tired, support from this computer buying helps push the market higher. Don't fight the tape.

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