ETF Trends
ETF Trends

Common sense dictates volume would be a strong indicator of exchange traded fund (ETF) price movements, given that these funds trade like a stock. Andrew Corn in Seeking Alpha reports with an ETF, unlike the stock of a public company, the number of outstanding shares of an ETF is flexible. ETFs represent an index made up of a pool of stocks, so the price of an ETF reflects the index.  ETF shares can be created or retired depending on the supply and demand.  The price moves with the sum of its underlying securities, thus supply/demand of the ETF shares is not a factor in itself of the price movement.  The value of its constituents in its underlying index is what matters. Volume can be an indicator of sentiment, but it is not what moves the ETF price. However, trading large amounts of an ETF can affect the price.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.