Massive Outflow From SPY – Weekly ETF Fund Flows

| August 11, 2014 | 0 Comments

fund flowsInvestors sold $15 billion more than they bought of ETFs that hold US stocks last week.

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.

The ETF hit hardest by the outflow of money was SPDR S&P 500 (SPY). The world’s largest ETF by asset size was hit with $14 billion in redemptions last week.

The massive outflow triggered a 7.8% drop in SPY’s assets under management. It dwarfed the inflows and outflows in other ETFs. This type of volume can only mean one thing… an institution exited a big position.

Big investors often use SPY as a proxy for US stocks. So pulling out of their long position in SPY is the same thing as saying they expect US stocks to move lower from here.

Needless to say, it’s not a good sign for US stocks when institutions are pulling out of their bullish positions. And it’s a clear indication that investor sentiment towards US stocks is trending towards bearish.

Beyond the mass exodus out of SPY, outflows also hit iShares Core S&P Mid-Cap ETF (IJH) to the tune of $1.3 billion and PowerShares QQQ (QQQ) for $965 million.

All in all the fund flows were bearish for ETFs that hold US stocks. However, we did see inflows outpace outflows in a number of sector specific and Treasury ETFs.

Investors added $2.4 billion in assets under management along the entire spectrum of maturities. iShares 1-3 year Treasury Bond (SHY) had net inflows of $1.2 billion, iShares 3-7 Year Treasury Bond (IEI) added $777 million, and iShares 20+ Year Treasury Bond (TLT) had $378 million in net inflows.

At the same time, investors used ETFs to add exposure to health care and consumer discretionary stocks. The Health Care Select SPDR (XLV) added $826 million and the Consumer Discretionary Select SPDR (XLY) added $798 million in assets.

So some investors are clearly taking the other side of the bearish outflow and expect health care and consumer discretionary stocks to lead the markets higher.

Here’s the thing…

Last week’s 7.8% drop in SPY’s assets under management indicates at least one big institution exited a large bullish position on US stocks. It’s impossible to know what motivated the seller to exit this position. But it’s clearly not the action of someone who is bullish on US stocks.

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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