Buying The Dip – Weekly ETF Fund Flows

| October 21, 2014 | 0 Comments

fund flowsLast week was a scary week for investors.

The S&P 500 broke through the 200-day moving average on Monday. That was all it took to trigger selling among some traders and many of the high frequency trading machines.

Don’t forget, the 200-day moving average is one of the most closely watched technical levels. Even people that don’t use technical analysis in any other way are aware of this long term moving average.

And a break below this important technical level caused a lot of the selling last week.

So, it comes as no surprise that the SPDR S&P 500 (SPY) had the biggest net outflow of all ETFs last week. It lost a total of $3.8 billion.

Needless to say, the break below this key technical support early last week was the main force behind the selloff.

By mid-week, fear of a major correction or start of a bear market had taken control of the market. We saw the fear in investors’ action as market volatility skyrocketed and the number of stock hitting new 52-week lows far exceeded the number of stocks hitting 52-week highs.

Fear was also evident as money poured into safe haven fixed income investments like iShares 1-3 Year Treasury Bond (SHY) and Vanguard Total Bond Market (BND). SHY had $1.7 billion in net inflows while BND had $613 million in net inflows.

It’s not too often that we see such extreme levels of fear in the market. And it’s even more unusual that such extreme fear lasts very long.

In fact, the American Association of Individual Investors Sentiment Survey show bullish sentiment actually increased 2.8% last week to 42.7%. That’s well above the 39.0% long-term average for bullishness.

It was a clear indication that many investors saw the selloff as a good buying opportunity. In other words, investors were buying the dip. And the ETF fund flows back up the AAII survey.

Last week, ETFs that track two of the hardest hit areas of the market – small cap stocks and energy – had large net inflows. iShares Russell 2000 (IWM) had a huge inflow of $2.5 billion and the Energy Select Sector SPDR (XLE) had net inflows of $1.2 billion.

Only professional money managers and institutional traders can drive that type of volume into IWM and XLE. So there’s some big money that thinks the markets can still move higher from here.

Here’s the thing…

Last week was filled with more volatility and uncertainty than we’ve been used to over the last 18 months. But it looks like the bulls still have control of the market.

The strong ETF fund flows into ETFs like XLE and IWM are a clear indication that investors are buying the dip.

That wraps up this week’s ETF fund flows…

Keep in mind, there’s a lot of information about ETF fund flows. And it can be a very useful tool as long as you know what you’re looking for.

Good Investing,

Corey Williams

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Category: ETFs, Market Analysis

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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