The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- We devote this commentary each week to assessing the many reasons markets may rise or fall. But at the heart of it, all markets come down to just one thing: buyers and sellers. Taking a look at who is buying and who is selling can tell us something about the durability of the market's performance and what may lie ahead. Presently, there are four notable trends in buying and selling in the stock market. U.S. stocks are being purchased by foreigners and corporations while selling is coming from individuals and insiders, or top executives, of companies. Foreigners Are Buying Purchases of U.S. stocks by foreigners in the first quarter of 2012 shows that demand by foreigners has rebounded from the uncharacteristic selling that took place in the second half of last year. Net purchases of U.S. stocks by foreigners in the first quarter totaled about $10 billion, according to the U.S. Treasury.
Should this data be seen as an important signal by those "in the know" of impending doom for corporate America? History offers a very different interpretation. Corporate insiders were buying in 2007 at the peak, and they were selling in 2009 as stocks were bottoming. Back in August of 2007, around the peak of the stock market, insiders at Financial companies were doing the most buying in 12 years. At the time, this trend was interpreted by some as a buy signal for Financials just before the companies in this sector fell more than 80%. Given this track record, we do not interpret the insider selling as a signal of impending losses. This fact does not suggest that they are acting on any inside information that would benefit an individual investor and instead may be selling in response to a three year bull market that doubled the value of the overall stock market. Projecting the Trends We expect foreigners and companies to continue to be net buyers while insiders remain sellers in the coming quarters. Fuel for a new bull market would most likely have to come from individual investors. One of the trends powering bond prices higher, and yields lower, is the strong demand from individuals as they continue to shift their investments from stocks to bonds. The potential for money to flow into the stock market and lift stocks is significant. However, individual investors must first become disillusioned with bonds. Since bonds have offered returns over the past thirty years that are competitive with stocks and provided much lower volatility, many are reallocating their portfolios toward bonds as they seek to provide for a comfortable retirement. It may take a period of rising interest rates from near historic lows to demonstrate the potential for losses and volatility that bond investors in the late 1960s and throughout the 1970s experienced to reverse the individual investor money flows back to stocks. Chart 4: Investors Have Been Favoring Bonds Money Flows to Bond Mutual Funds in $Millions
Source: LPL Financial, Investment Company Institute (ICI) 5/11/12