SPY ETF Increases Outflows Even As Stock Indexes Rally Higher

Despite abysmal unemployment data and a raging coronavirus epidemic, somehow stocks are still managing to stabilize near recent highs, after moving off of the lows in March. But interestingly, even as stocks move higher, the well-know fun, SPDR S&P 500 ETF Trust (SPY), is showing an outflow of funds.

According to Tom McClellan, market technician and publisher of the McClellan Market Report, investors are making an exodus from one of the most popular exchange-traded funds on Wall Street, all while stocks continue to rally.

The State Street-sponsored SPDR S&P 500 ETF Trust SPY, which roughly tracks the major stock index that bears its name, providing investors exposure to S&P 500 index stocks, is generally considered the most liquid and frequently traded ETF and includes assets of $254 billion. The SPY has rallied 29% since tagging a bear-market low on March 23, coinciding with the low of the broad-market index that it tracks.

Yet while one would imagine that a 29% rally would be enticing investors to add capital to SPY, funds have actually been flowing out of the popular ETF recently.

The SPDR S&P 500 ETF Trust has seen net outflows in 11 of the past 15 sessions as of May 6, according to FactSet data, a stark contrast to other funds like the Invesco QQQ Trust (QQQ), which has gathered assets during the same time period instead. QQQ has seen net inflows of nearly $5 billion of the past 30-days, and more than $8.6 billion so far in 2020.

McClellan writes, that as the “rally has proceeded further, investors have started getting shy and pulling out of SPY,” and he notes that the number of total shares outstanding for the ETF has touched one of the lowest readings “of the past few years.” Over the past month, the SPY has seen net outflows of $9.7 billion, which sums to outflows of more than $22 billion in the year to date.

This could be potentially good news for markets, says McClellan however, as negative flows may suggest that the uptrend for stocks persist. “This conveys the message that investors are not believing in the uptrend, which of course is a sign familiar to every contrarian, that the uptrend should continue,” he said.

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