WHAT'S THE TREND?

As they say the trend is supposed to be your friend.

So what's the trend? Well, when things are weak and the future uncertain, retail investors lean toward larger, so-called safer equities many of which offer some income. As the economic malaise tends to disappear, they start moving into smaller, more risky bets like small and mid-cap stocks.

So what's going on now and how does this compare with what retailers versus the often referred to smart money? The bear market started in 2007 and ended by most accounts in 2009 just about the time the retail crowd, believing their pain threshold was exhausted, started exiting mutual funds.

US households are the largest owners of mutual funds.  In other words they were selling near the bottom. They did not return to the market until the bull was well out of the gate. According to one recent report, and there are several others, the so-called smart money got in much earlier and started getting out earlier this year, even before Bernanke notoriously misspoke. 

That trend, the reports say, has continued with corporate insiders. Again, according to recent data, the Russell 2000 and Nasdaq have of late been the hottest benefactors from inflowing money. As one market observer recently noted, the smart money tends to buy in and sell out earlier while the retail crowd does just the opposite. 

And whether one is talking mutual funds or individual securities the data tend to support the above. 

Go figure.