In the week ended May 15, 2004 NYSE Member Net Buy/Sell numbers hit a new, all-time high of net buying of +741,439,000 shares. There are only two other occasions of net buying that even come close to this -- +540,105,000 shares in the week ended November 14, 2003, and +588,248,000 shares for the week ending March 28, 2003. As you can see by the chart, there is no other week that even comes close to these three huge buying spikes.
You will also note that each of the two prior buying spikes occurred immediately prior to a significant market advance, and, in my opinion, the current buying spike is an extraordinarily bullish event.
NYSE Members are the middlemen who make their money by accumulating stock during declines and selling back it to us at a profit during the next advance. If they have acquired this much inventory, I think we can assume they expect to distribute it at higher prices over the next several weeks.
Can they be wrong? I suppose so, particularly if there is a catastrophic event affecting stocks prices (and highly likely that they have this position fully hedged), but it makes no sense to me that they would load up on stocks to this extent unless they are pretty sure they will be able to turn this inventory at a profit.
As you can see on the chart, most of the time it is hard to make much sense of the net buy sell numbers, but significant amounts of NYSE Member buying or selling should serve as red flags, because it is their business to insure that their positions unwind in their favor.
NOTE: NYSE Member Net Buy/Sell numbers are available from Barron's (print and online), and they are released by the NYSE two weeks in arrears so that we can't know what they are doing in real-time.
