Investors See Value In Oil Funds – Weekly ETF Fund Flows
Today we’re taking a look at ETF fund flows for the first full week of trading in 2014.
ETF 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.
Fund flows are something traders use to find trends and gauge investor sentiment. And it can help you pinpoint which ETFs could be next to make a big move higher or lower.
Unlike 2013 when inflows spiked to record highs, the inflows in the first full week of 2014 were a bit of a dud.
One ETF that caught my eye near the top of the list of net inflows is the United States Oil Fund (USO). USO had net inflows of $450 million last week.
USO tracks the change in the price of futures contracts on light sweet crude oil on the New York Mercantile Exchange.
The inflow of money into USO comes on the heels of a dramatic drop in oil prices over the last few weeks. The price for a barrel of light sweet crude oil has fallen 9% from around $100 on December 27th to a low of $91.27 on January 9th.
The drop sent oil prices to their lowest levels in six months. It’s now near support of the previous low. The last time oil fell to these prices it bounced back quickly.
The inflow of money into USO is a clear indication some investors are expecting this support level to hold and oil prices to bounce back in the days and weeks ahead.
On the other hand, investors pulled money out of broad based stock ETFs like SPDR S&P 500 (SPY) and iShares Russell 2000 (IWM), as well as emerging market funds Vanguard FTSE Emerging Markets (VWO) and iShares MSCI Emerging Markets (EEM).
They lost a combined $6.5 billion last week.
Needless to say, the large outflow doesn’t reflect an overly bullish outlook for stocks.
And the weak jobs report on Friday didn’t help to alleviate any of the fears that are driving investors out of equity funds. In case you missed it… the US add just 74,000 jobs in December.
It was the smallest monthly gain in non-farm payrolls in three years. And it could be an indication the US economy is losing momentum as we enter 2014.
However, there is a silver lining. If the economy isn’t adding jobs as quickly as the Fed anticipated, they will likely wait to pull back on any further reductions to their monthly purchases of Treasuries and mortgage backed securities.
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
Category: ETFs, Market Analysis
