Financial sector ETFs continue to demonstrate impressive relative strength and leadership with Financial Select Sector SPDR (NYSEArca: XLF) rallying 20.92% year to date versus the S&P 500 Index up 11.31%.

Financials, which have been a market leader as we have noted throughout the first quarter in 2012, were also among the leaders in net creation activity last week as SPDR S&P Bank ETF (NYSEArca: KBE) attracted nearly $400 million in new assets and XLF took in nearly $300 million. There is some degree of overlap in the two products as Bank of America (NYSE: BAC) is a prominent weighting in both, and KBE has more of a regional banking focus whereas XLF has significant exposure to “money center” banks as well as diversified financial services equities including BRK.B. From a benchmark standpoint,

Equities worked their way lower for most of the week following Monday’s intra-day high of 1414.00 in the SPX (which is also a new multi-year high) until a mid-day rally took place last Friday. Our market technician David Chojnacki recently noted that we currently have mixed technical signals in the major averages (DJIA, NDX, SPX) which will likely result in “choppy or side-ways action in the near term.”

On the SPX, upside technical resistance lies at 1412 and 1425, but there is interim support at 1388 and 1375, and the SPX bounced off of 1388 and ran higher on several occasions last week. Volumes were below average for the most part last week in equities, and despite the weakening from recent highs, the VIX remains near recent lows, closing at 14.82 on Friday and it has spent 12 consecutive trading days now below its 50 day moving average.

Directional options flows were relatively light last week as well, with some scattered put buying in broad based products such as SPY on occasion last week as well as specific sector ETFs including XME, XOP, XLI, and XLB for example late last week, but again, there was no real compelling evidence of institutional options players taking an outright bullish or bearish stance on anything in the near term via observable options activity.

Despite the VIX continuing to toil at recent lows and related “Long VIX” ETNs and ETFs suffering accordingly, the leader in inflows last week via creation activity was iPath S&P 500 VIX Short Term ETN (NYSEArca: VXX), which took in close to $600 million. We note that VXX has traded huge volumes in the past several sessions, with a number of 50 million share plus trading days versus average daily volume of about 28 million shares.

Relatively obscure Barclays S&P Veqtor ETN (NYSEArca: VQT) which seeks to establish a volatility hedge for investors by dynamically allocating across three asset classes, equity, volatility, and cash, also saw considerably activity last week and reeled in nearly $200 million in new assets on heavier than average volumes.

Perhaps the biggest story of last week was VelocityShares Daily 2X VIX Short Term ETN (NYSEArca: TVIX) which traded huge volumes and sold off sharply beginning on Thursday of last week, even though the official news that Credit Suisse, the bank securing the ETN, was reinstating creations in the product only hit on Thursday night well after the close. [What Happened with TVIX]

Volumes were literally off the chart in TVIX, which had previously traded like a Closed End Fund for the past several weeks, on both Thursday and Friday as the “premium” that has existed in the product ever since creations were suspended weeks ago by Credit Suisse vanished in short order, as arbitrageurs, institutional funds, and institutional trading firms aggressively became involved in the product once again moving it back in line relative to other “long VIX” products.

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