Maria Bartiromo's Investor Agenda

Published: Friday, 10 Jul 2009 | 2:46 PM ET

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One of my favorite stock market indicators is the flow of money into – or out of – mutual funds and exchange traded funds (ETFs). There is no question that the best source for this information is a firm called TrimTabs, founded nearly 20 years ago by Charles Biderman.

I’ve interviewed Charles dozens of times through the years, and I always find his analysis insightful. In fact, I spoke to him toward the end of June, just as the market was beginning another leg up.

He, however, was bearish, and he was exactly right. After hitting a recent high of 928 on June 29, the S&P 500 has fallen about 5% in just a couple of weeks.

He told me there were three signs that led him to believe the market would turn back down:

1. Individual investors were putting more money into mutual funds and ETFs than they had in a long time. His research indicates this is often a precursor to a pullback.

2. While individuals were pumping money in, corporate insiders were taking it out. Insiders were selling at about 27 times the rate that they were buying.

3. New offerings were flooding the market with additional shares, about $100 billion worth, which dilutes value.

I asked Charles what this meant for investors, and here is what he told me:

I would take my profits, if I’m a trader. And if I’m a long-term player, I would still lighten my equity exposure dramatically. And if I’m a real trader, I’d be short. I went short. We doubled up to fully short this week (the week of June 15).

I think this is the time to short the banks. I also think this is the time to short retail and consumer discretionary. And I’m also looking at selling my oil positions, which had been my safe hedge.

He also told me that cash was the next best option for those who are not comfortable shorting stocks, which a lot of investors are. His personal IRA money, he said, was going into the Vanguard high-grade corporate bond fund.

I’ve found fund flows to be a generally reliable indicator for the market, so we’ll check in with Charles frequently to stay on top of what they are telling him and what they portend for your investments.

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• The Dow 30 in Real Time
• Slideshow: Companies at Greatest Risk for Default
• Slideshow: World's Biggest Debtor Nations
• Slideshow: Largest IPOs In US History
• The CNBC Stock Blog

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