Focus on Funds

Where Will The Market Go From Here? Look To ETF Flows

The stock market hasn’t made much headway since mid-summer, but will there be more pain ahead, or gains?


Asbury Research thinks ETFs have the answer. John Kosar writes that total net assets invested in the SPDR Dow Jones Industrial Average ETF (DIA) are testing their recent extreme low level, of $11.5 billion. That coincided with the three most recent near-term bottoms in the Dow Jones Industrial Average: May 23, June 27, and September 14.

He argues that the flows to DIA over the next week or so could be used as a leading indicator as to whether or not the market has seen the worst already, or if more pain is on the way.

Detail from his note:

“This means that, from an asset flows standpoint, this is where new investor dollars should come back into DIA, and the Dow 30 it represents, if investors collectively believe that the recent market pullback was a buying opportunity and that new all-time highs are on the horizon.

Conversely, we would view a sustained decline appreciably below $11.5 billion as evidence that investors are liquidating longs in anticipation of a deeper decline, one which could push the bellwether S&P 500 below its lower threshold of 2121 to 2104 and potentially down to the next major underlying support level near 2070.”

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Asbury Research subscribers can view the report from which this article was derived, with the accompanying asset flows chart, by logging into the Research Center.

Interested investors can request a sample copy of the report, along with services and pricing info, by clicking here or calling 888-960-0005.

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