Stock exchange traded funds indexed to the S&P 500 and other major benchmarks have broken free of their recent trading range, raising hopes for a year-end rally
The S&P 500 has climbed above 1236, which is the level of the so-called Fibonacci 50% retracement point from the high in July and the recent low point touched earlier in October. Surging above this point is certainly encouraging for bulls. [Top of the Trading Range]
We did not see strong volumes however at any point in the past week, where volumes were average to below average at best, even amidst options expiration on Friday.
Despite the stock rally, SPDR S&P 500 ETF (NYSEArca: SPY) saw outflows of nearly $3 billion over the week, as did iShares Russell 2000 (NYSEArca: IWM) on the small cap side, and other large cap broad based products including PowerShares QQQ (NasdaqGM: QQQ) and SPDR Dow Jones Industrial Average (NYSEArca: DIA) mostly saw inflows.
The iShares S&P 500 (NYSEArca: IVV), on the other hand, saw substantial net inflows, and it is possible that institutional managers are engaging in swaps from one ETF to another going into year’s end.
From a sector standpoint, retail was unquestionably in play as SPDR S&P Retail (NYSEArca: XRT) took in over $100 million which is nearly one third of the total asset level in the fund. It is not unusual for the sector to be active this time of year given the upcoming post Thanksgiving and pre-December holiday season shopping spree which is a major driver for many of the equity names within the index.
We also point to strong price performance on heavier volumes in financials, specifically with Financial Select Sector SPDR (NYSEArca: XLF) closing at its highest level since mid September. [Financial ETFs Need to Lead]
Also, a trend of call buying has been prevalent in XLF for several weeks. This is an indicator that perhaps the rally in financials will continue in the months to come.
Elsewhere, we had spoken about the emerging markets a few weeks back and the lagging performance year to date in comparison to the U.S. equity markets (EEM down 18.44% with SPY down 1.41%).
EEM saw nearly $1 billion in new assets hit the fund this past week, so clearly there is a view that the space may rebound going into year’s end and potentially narrow the performance gap in between the emerging markets and the U.S. domestic equity market.
The S&P 500 ETF has also cleared its 200-day exponential moving average.
SPDR S&P 500
For more information on Street One ETF research and ETF trade execution/liquidity services, contact pweisbruch@streetonefinancial.com.