ETFs That Investors Are Buying on Weakness

A 3-day bout of selling pressure? How far back do we need to look to find that short-term trend? Did 9/23 usher in the start of the correction?

There are plenty of reasons for the sudden change in sentiment, even as U.S. consumer sentiment hit its highest levels since January of 2008; that is, we’ve got more than a few causes for a pause.

The U.S. dollar is hitting 7-month lows against the yen. Both existing home sales and new home sales had disappointed. Durable goods sales were weaker than anticipated. And hey… there hasn’t been a “health-restoring” correction for close to 7 months.

Yet everyone should be well aware that fund managers and money managers are eagerly awaiting the chance to buy the dips. With dollars easily available to institutions and market-movers worldwide, as well as increasing “comfort” on the part of individuals, it’s important to see what people are buying on weakness. (And that goes double on a 3rd day of selling pressure!)

Near the final hour of trading, here are the most popular ETFs being bought on weakness:

ETFs That Investors Have Been Buying On Weakness (9/25/2009)
Millions Flowing In (Through 3:00 P.M.)
SPDR Select Financials (XLF)					30.1
Vanguard All World excluding U.S. (VEU)					27.8
iShares S&P 500 (IVV)					14.4
SPDR Retail (XRT)					9.6
Direxion 3x Financial Bull (FAS)					7.3

I am not surprised by the interest in broad market ETFs like iShares S&P 500 (NYSE: IVV) and Vanguard All World excl U.S. (NYSE: VEU). Asset managers are dying to put money to work in set asset allocations where IVV and VEU are core components.

I am, however, continuously surprised by intrigue in financial stocks through SPDR Select Financials (NYSE: XLF) and Direxion 3x Financial Bull (NYSE: FAS).  It’s almost as though momentum investors think that extremely volatile, still sickly stocks, will somehow soar unimpeded. Yet banks are barely lending, and cost cutting or trading gains can only take them so far.

Retail (NYSE: XRT) is another one that continues to confound. Perhaps it’s the consumer sentiment numbers. Perhaps it’s the recognition that leopards don’t change their spots… so Americans will keep consuming.

Nevertheless, I wouldn’t be buying XRT or XLF on weakness. I’d be more apt to buy Global Energy (NYSE: IXC) or Emerging Markets (NYSE: EEM).

Speaking of which, what is the most popular ETF outflow for today? $24 million left EEM’s coffers. Keep in mind, though, Vanguard Emerging Markets (NYSE: VWO) tracks the exact same index, and nothing was leaving there.

Moreover, developed market turnover is larger than that of emerging markets; that is, investors tend to keep emerging market investments!

 

If you’d like to learn more about ETF investing… then tune into ”In the Money With Gary Gordon.” You can listen to the show “LIVE”, via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.