What Do The January ETF Fund Flows Tell Us?
As the first month of the year comes to an end, we’re taking a look at the January ETF fund flows and other sentiment indicators for clues to the market’s next move.
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.
ETFs reached $2 trillion in assets under management in December. But they didn’t add much to those totals in January.
The emotion driving January ETF Fund Flows…
We monitor several fundamental and technical indicators of fear and greed.
Right now, indicators like stock price breadth, demand for safe haven investments, and option volumes indicate that fear is the dominant emotion on Wall Street.
What’s more, the price action on the monthly chart of the S&P 500 is forming a dangerous reversal formation after the large cap index failed to make a new high in January.
The good news is, we saw similar price action last January. And the US large cap stock market recovered in the following months and ultimately had a very strong year.
The ETFs with the largest inflows in January…
In January, the ETF with the largest net inflow of money was the WisdomTree Europe Hedged Equity ETF (HEDJ). It gained $2.8 billion in assets, the vast majority of these inflows came in the last weeks of the month.
HEDJ is an interesting ETF. It’s designed to provide exposure to European equities while neutralizing fluctuations between the Euro and the US Dollar.
If you didn’t know, the Euro has been weakening against the US Dollar. So, any investment an American investor makes in European stocks is dealing with headwinds from the currency changes.
HEDJ seeks to eliminate these currency changes so that US investors can invest in European stocks without the need to worry about the currency market volatility.
Another ETF that saw large inflows was the SPDR Gold ETF (GLD). This ETF that tracks the price of gold added $1.9 billion in assets last month.
This is a reversal of fortunes for GLD that had nearly $4 billion in outflows in 2014. Needless to say, increased interest in this safe haven investment is an interesting development to start the year.
The ETFs with the largest outflows in January…
There was a clear cut loser in the ETF fund flows battle in the first month of the year… SPDR S&P 500 (SPY) lost $26.7 billion in assets.
SPY is a massive ETF with $185 billion in assets under management. But these large outflows are a clear indication that traders and investors are pulling back on their bullish bets on large cap US stocks.
As you can see, there are many warning signs in the ETF fund flows and other market sentiment indicators. Right now, fear of a stock market correction is the dominant emotion driving the markets.
Use caution when initiating new positions.
Good Investing,
Corey Williams
ETF Trading Research
Note: Corey Williams writes and edits ETFTradingResearch.com. Sign up for our free ETF reports and free e-letter at http://www.etftradingresearch.com/free-sign-up. We’re devoted to helping you make more money from ETFs.
Category: ETFs
