Look Who's Buying and Selling

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.

Shaded areas are recessions

Companies Are Buying Back Shares

After taking advantage of the market rebound in 2009, corporations issued shares in 2010. However, since then they have returned to near record levels of net share repurchases.

Corporations have become net buyers of shares as rising cash flow and wide profit margins compel them to shrink their share count to boost earnings-per-share as revenue growth slows.

Individual Investors Are Selling

Individual investors have been net sellers, measured by the flows of mutual funds that invest in U.S. stocks. They have been selling for 12 straight months. During the past 12 months, investors in these funds have sold more than they did during 2008.

Chart 3: Individual Investors Continue to Sell

Money Flows to Domestic Equity Mutual Funds in $Millions

Source: LPL Financial, Investment Company Institute (ICI) 5/11/12