Can These ETFs Bounce Back? – Weekly ETF Fund Flows

| October 13, 2014 | 0 Comments

fund flowsLast week the S&P 500 dropped 3.2%.  The 64 point drop was the worst week for the S&P 500 in three years.

Needless to say, the market’s performance has hurt ETF fund flows, investor sentiment, and pushed fear of deeper market correction to the forefront of every investor’s mind.

The biggest concern for investors is global economic growth. 

It seems likely that the weakness in Europe, China, Japan, as well as many developing markets, will eventually show up as slower US economic growth and weaker than expected corporate revenue and earnings growth.

What’s more, the S&P 500 is being dragged down by the energy sector.  Oil and gas stocks are getting crushed as crude oil prices have plummeted from over $100 to around $85 per barrel.

As a result, we have seen measures of fear and greed in the market tilt toward extreme levels of fear.  For instance, the CBOE Volatility Index is at its highest level in more than two years.  And the number of stocks hitting 52-week lows exceeds the number of stocks hitting 52-week highs for the first time in more than two years.

Not surprisingly, ETFs that hold stocks were hit with outflows.  The PowerShares QQQ (QQQ), iShares MSCI Emerging Markets (EEM), and Vanguard FTSE Europe (VGK) had the largest outflows.

QQQ lost $1.45 billion, EEM lost $1.12 billion, and VGK lost $1.03 billion last week.   The $3.6 billion is a large outflow from these popular US listed stock ETFs.

Fund flows are a valuable indicator of what traders are thinking. It takes a lot of buying or selling to drive millions or even billions of dollars into or out of individual ETFs.

Clearly, investors are pulling out of these funds in anticipation of bigger losses in the near term.

However, we did see the American Association of Individual Investors Sentiment Survey show bullish sentiment increased 4.5% from the previous week to 39.9%. That’s just above the 39.0% long-term average for bullishness.

Clearly some investors are looking to buy the dip. 

Based on the ETF fund flows, investors were looking toward the S&P 500 and biotechnology stocks as a way to buy the current dip.

Inflows into SPDR S&P 500 (SPY), iShares Core S&P 500 (IVV), and iShares Nasdaq Biotechnology (IBB) outpaced outflows by $968 million, $935 million, and $498 million respectively.

Here’s the thing…

Investors are in a state of extreme fear.

Slowing global economic growth, slumping oil prices, a strong US Dollar, the end of the Fed’s bond buying program, and uncertainty around the timing of their first rate hikes has killed the stock market’s bullish momentum.

And right now we’re seeing investors take profits, protect themselves from a bigger correction, and position themselves for a rebound if it materializes.

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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