Real Estate ETFs Are Hot, Energy ETF Are Not – Weekly ETF Fund Flows

| August 26, 2013 | 0 Comments

fund flowsToday we’re taking a look at ETF fund flows in iShares US Real Estate (IYR) and Energy Select Sector SPDR (XLE).

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.

Let’s take a look some interesting fund flows from the leading ETFs from August 19th to August 23rd.

iShares US Real Estate (IYR) has been on a rollercoaster ride this year.

IYR began the year with a bang.  At the time, investor demand for REITs was off the charts because they were benefiting from record low interest rates and they pay a solid dividend yield.

Over a six month period, IYR surged 25% off the November 15th low of $60.84.  However, the run came to an end on May 22nd when it hit a high of $76.21.

As you might remember, May 22nd was the first time we heard the Fed could begin to taper their monthly purchases of $85 billion worth of Treasuries and mortgage backed securities.

That was bad news for interest rate sensitive and dividend paying stocks like REITs.

Over the last three months, IYR dropped like a rock.  Last week it hit a low $60.92, essentially wiping out the entire six month rally.

ETF investors saw this as a buying opportunity.  Last week they poured $882 million into IYR as it began to bounce back.

It remains to be seen whether this is the beginning of a new uptrend for IYR or if it is simply a dead cat bounce.  Remember, even a dead cat will bounce if you drop it from high enough…

On the other hand, the Energy Select Sector SPDR (XLE) was hit with over $1 billion in redemptions last week.

The exodus out of XLE comes after it has been essentially flat or down over the last three months while crude oil prices have soared more than 10% to over $105 per barrel.

Typically we’ll see energy ETFs mirror oil prices.  The breakdown of this relationship has forced some investors to pullout of their investment in XLE.

And for good reason…

$110 oil has been the line in the sand.  When oil reached this level in 2011 and 2012, it was followed with a swift selloff that sent crude oil plunging to $80 per barrel.  In other words, there’s a technical resistance level at $110 that will likely keep a lid on oil prices.

In short, if oil prices don’t move higher, there’s not a catalyst to drive XLE higher.

What’s more, if there’s a similar drop in oil prices like we’ve seen the last two years, it will surely drag oil and gas stocks down with it.

I can’t blame the investors who sold XLE last week for pulling the plug on this investment.  In this case, the odds clearly favor more downside in XLE.

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, Sector ETFs, What's Going On?

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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