ETF Flows Can Reveal Market Sentiment

September 03, 2014

SHY FLows

And here they are for IEI:

IEIFlows

The fact that all those flows occurred on one day suggests that a single large investor made these decisions, as opposed to "investors" in general. In fact, we can probably even guess which investor made these bets: Good Harbor Financial.

Good Harbor is a large, well-run ETF strategist firm with $10 billion invested in quant-driven ETF strategies. It rebalances its portfolios twice a month—once on the 15th and once at the end of the month—which coincides perfectly with the timing of these flows (due to settlement delays, fund flows don't always appear the day an investor buys a fund).

What we're seeing in the flows for IEF, SHY and IEI is Good Harbor getting nervous, not the market in general. That's a worthwhile signal—Good Harbor has a great track record—but it's just one opinion. And in fact, a quick glance at this morning's preliminary flows numbers suggest big outflows in both SHY and IEI, two of the Good Harbor targets in question.

 

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