Climbing A Wall Of Worry– Weekly ETF Fund Flows

| September 24, 2014 | 0 Comments

Investor sentiment is bullish on stocks.  The strong inflow of new money into ETFs last week reflects their bullish sentiment.  But some of the other market action reveals that investors are becoming more fearful.

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.

Last week US listed ETFs gained around $12 billion in net inflows.  SPDR S&P 500 (SPY) led all ETFs with $6.0 billion in net inflows and the iShares Core S&P 500 (IVV) added $1.9 billion.

That’s a whopping $8 billion in money flowing into ETFs focused on the S&P 500.  And it’s not the only thing showing investors’ bullish sentiment.

The American Association of Individual Investors Sentiment Survey showed that bullish sentiment increased 1.9% from the previous week to 42.2%.  That’s above the 39.0% long-term average for bullishness.

The bullish outlook for investors was clearly helped along by a few tech companies.

The successful IPO of Alibaba (BABA) was a bullish catalyst.  The Chinese e-commerce company raised a record $21.8 billion in its IPO.

And Apple (AAPL) sold more than 10 million new iPhones in the first three days.  Needless to say, bullish sentiment toward AAPL goes a long way to lift investor sentiment.

ETF outflows outpaced inflows for Treasury and emerging market ETFs. 

The iShares 7-10 Year Treasury Bond ETF (IEF) took the biggest hit.  IEF lost $2.5 billion in assets last week.  And the iShares MSCI Emerging Markets (EEM) had the next largest outflow with a loss of $827 million.

The outflow from Treasury bond ETFs is another good sign for the bulls.  These safe haven investments are typically out of favor when investors are bullish on stocks.

But there are also several indicators showing that investors are becoming more fearful.

For instance, the number of stocks hitting 52-week highs has fallen off considerably over the last few months.  That’s an indication that the strength of the rally is fading.

What’s more, we’re also seeing more volume in stocks that are down than in those that are up.  In other words, people are more likely to sell a stock that is down than to buy one that is going up.  That’s an indication that investors are becoming more fearful.

Here’s the thing…

The ETF fund flows, as well as investor sentiment surveys, show that investors are growing more bullish, but they’re also growing more fearful.

In other words, stocks are climbing a wall of worry.  And that’s usually a good sign for the bulls.

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

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 on a daily basis. 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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