Money Flows is the oldest form of stock market analysis, ticker tape reading. In the early twentieth century, traders would gather around the paper tape at brokerage houses where they would look for stocks that were being accumulated (bought) or distributed (sold). In other words, were the larger trades taking place on upticks or on downticks?

When these traders found a stock that was under consistent accumulation, they would buy and if they happened along a stock where the larger trades were being done on downticks, they would sell.

Money Flows does the same thing these early traders did; the only difference is that the computer does it for us. In the 1980s we programmed the computer to track and analyze every single trade in every single stock to measure the excess of demand over the available supply (for buys) and supply over demand (for sells). So, you can say we were quantitative investors before there were quantitative investors.

We want to know who is being more aggressive, the buyers or the sellers. While it is true every stock transaction has one buyer and one seller, the reality is that one investor bought the shares, but it traded higher, because there were other investors willing to do so and our investor had to outbid those other investors. It is similar to the housing market where there is one buyer and one seller, yet the house sold over asking. Why? Because, while there was one check written from one buyer, right behind that buyer were ten others willing to do the same.

Money flow thus gives a picture of the balance between buying and selling interest (that is, net demand/supply). Think of Money Flows as the third area of stock market analysis. There is fundamental analysis, which looks at sales, earnings, new products, etc. There is technical analysis which analyzes oscillators and charts. And then there is the third method of stock analysis, and in our view, the only leading indicator of the future direction of stock prices, Money Flows. What are people doing with their money, instead of what they say they are doing?

Every week (on Friday) we analyze the money flows on 1,500 U.S. stock’s and send that analysis to our mini-institutional subscribers. What stocks are under accumulation, which moved from neutral to sell or neutral to accumulation?