For the first since August, retail investors are returning to the stock market: After removing some $53 billion from U.S. mutual funds and ETFs this year, Main Street investors plunged $3 billion into domestic stocks during the week ending October 21.

This marks a large shift in sentiment as, up to this point, emerging markets, bonds, and money market mutual funds were receiving the bulk of investors' attention. It seems the bad memories of the S&P 500's 58% fall from its 2007 peak no longer linger as recent gains have resuscitated the speculative spirit.

Unfortunately, if history serves as any guide, the return of the great masses to U.S. equities is cause for concern. Assuming financial markets operate on the greater fool theory, who will be left to provide new buying power? Indeed, there are signs savvy professionals are already heading for the exits: According to UBS analysts not only have U.S. hedge funds, mutual funds, and other clients been net sellers for the last 13 weeks, but they've recently increased their pace of selling.

For the fifth week in a row, long-only mutual fund managers were the heaviest sellers. Foreign investors continue to buy U.S. equities, although their pace of buying has slowed. By sector, industrial, healthcare, financial, and telecom stocks saw the most concentrated selling. Technology and media stocks were the only areas to see buying.

As you can see in the chart above, long-only funds are now selling stocks are a rate not seen since late last year. Selling activity in December led to broad market weakness in January and February. Similarly, a surge of selling activity back in May and June helped push stocks down to their July lows. Until institution investors cull their selling activity, I would avoid allocating additional capital to U.S. markets.

My positions

I expect the broad market weakness to continue for another day or two, so my portfolio at Wall Street Survivor maintains its bearish posture with inverse ETFs and selected short positions. I'm up 5.5% for the week compared to a -1.7% return on the S&P 500. For the month, I'm up 24% while the S&P 500 has gained 0.6%.

Disclosure: The author does not own or control a position in any of the funds or companies mentioned.

Anthony Mirhaydari is a researcher for the Strategic Advantage investment newsletter. He can be contacted at anthony.mirhaydari@live.com. Feel free to comment below.