A Barron’s article over the weekend discussed flows into and out of exchange-traded funds that bet against the market as a potential sentiment indicator (linkhere, subscription may be required).
We’ve looked at volume into and out of those funds in the past, and it has been mostly effective…except lately. So what about the actual assets in those funds?
We took a look at the top bearish ETFs that had more than 500,000 shares in average daily volume over the past 3 months. There were 19 of those. Then we chose the ones that have released at least two years’ worth of daily asset levels. That left us with 13 funds.
Over the past few years, the assets have formed a fairly defined range, between $6 billion on the lower end and $11 billion on the upper end.
The assets are clearly getting low, currently totaling $6.7 billion. The history at the lower end is too short, however, to really determine if this is an adequate contrary indicator on an intermediate- to long-term time frame. The funds just haven’t been in existence long enough to find out.
Images: Flickr (licence attribution)
About The Author
Sundial Capital Research, Inc. is a company dedicated to the research and practical application of mass psychology to the financial markets. Sundial publishes the sentimenTrader.com website.
The work of Sundial Capital Research has been mentioned in publications such as Barron’s, CNN, CNBC, SFO Magazine, The Economist, Reuters, The Wall Street Journal, Active Trader, Futures, TheStreet.com, TradingMarkets, and many others.
Sundial Capital Research founder Jason Goepfert won the 2004 Charles Dow Award for excellence in technical analysis from the Market Technicians Association. SentimenTrader.com won the award for Most Useful Website for Traders in 2008 from SpikeTrade.com.