The past week was characterized by a batch of mixed earnings reports and overall, narrow trading ranges for the major indices. The SPX, as our market technician David Chojnacki pointed out late last week in a client note, has been trading “in Limbo” which is defined as the range between 1370 and 1388. Below 1370 he sees potential selling pressure that could take the index down to 1340, but above 1388 there is upside bias.
Not surprisingly, the SPX has clung rather tightly to its 50 day moving average during this narrow trading range over the past several weeks as well. On the whole, ETF/Index options activity have expressed caution for several weeks now, but the volumes are not earth shattering, and mostly appear to be institutional portfolio managers hedging positions via puts in products such as IWM, SPY, and EEM for instance, and not outright bearish speculation.
Fund inflows were much lighter in absolute terms compared to outflows, as the leader in creations, SPDR Basic Materials (NYSEArca: XLB), only took in about $450 million in new assets. XLB is heavy names including DD (11.25% of the index), MON (9.74%), FCX (8.23%), PX (7.81%), and NEM (5.79%). DIA was also near the top of the list in terms of creation activity, taking in more than $400 million in new assets, as was Vanguard S&P 500 (NYSEArca: VOO) which continues to see impressive inflows in recent weeks (+$370 million via creations).
Some other sector specific funds also saw notable inflows, including SPDR Energy (NYSEArca: XLE) and SPDR Industrials (NYSEArca: XLI), collectively accumulating nearly $500 million in new assets.
Outside of equities, a number of fixed income related ETFs were also very active last week on the creation front. The iShares High Yield Corporate Bond (NYSEArca: HYG), SPDR Barclays Capital Aggregate Bond (NYSEArca: LAG), Vanguard Total Bond Market (NYSEArca: BND), SPDR Barclays Capital High Yield Bond (NYSEArca: JNK) and iShares Investment Grade Corporate Bond (NYSEArca: LQD) all ranked among the top 10 in the ETF landscape in terms of net creation activity, and collectively hauled in about $1.1 billion in assets.
Going into the final trading days of April and with the major indices well off of their late March/early April highs, we will watch technical levels closely this week to see if we can gauge any indication of whether the 2012 rally can continue going into the summer, or if we will have a rude surprise like 2011’s swift and sudden late summer correction.
For more information on Street One ETF research and ETF trade execution/liquidity services, contact [email protected].