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What you need to know about the slowdown in buybacks

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For the past six years, companies have helped fuel the bull market by repurchasing trillions of their own shares.

But if the market rally is to continue, investors may have to find another sugar daddy.

Buybacks are on the retreat in 2016, hitting a 21-month low in March and not showing much pop in April either, according to market data analytics firm TrimTabs. March repurchases amounted to just $24.1 billion and are at a measly $3.2 billion in April, TrimTabs reported over the weekend.

That slowdown has come after a period since 2010 when companies bought back more than $2.7 trillion of their own shares as the market rallied more than 200 percent off its recession lows.

The good news is that the market has stayed afloat, with the S&P 500 gaining 8.1 percent in the period. Maintaining that momentum will require investors to believe that there are now better things S&P 500 companies can do with the $1.44 trillion (per FactSet) in cash on their collective balance sheet than buy back shares.

"If you were of the belief that (buybacks have) been a key leg of support for the market, it may be distressing news," said Art Hogan, chief market strategist at Wunderlich Securities. "If this is a pivot point for corporations to say, 'My stock is fully valued, I have found better use of capital,' that is good news."

During earnings season, investors should watch for whether "free cash will be used in another fashion, whether it's dividends, capital equipment, hiring people or accretive acquisitions," Hogan said.

The key determinant in buyback decisions is value. With the S&P 500 now trading at nearly 17 times earnings, which FactSet reports is well above the five-year and 10-year averages, the temptation for buybacks likely will diminish.

In addition to slower corporate repurchases, insiders also have slowed their activity. Insider buying fell from a spike of $140 million a day from Feb. 8-17 to $30 million a day since Feb. 18, according to TrimTabs.

"Ostensibly, bubyacks should be used when valuations are at low points, not high points of a cycle. To see them diminish in real terms is actually constructive," Hogan said. "What will be telling is does corporate America find a better use of capital. Some of that capital, you hope, is being invested in the future."