Suttmeier also believed the approach of Friday's option expiration was causing some traders to get into the big ETFs as a way to broaden their exposure to the market while unwinding short and long positions in specific stocks. "I've had more success in trading the Qubes." "It's been harder recently to pick stocks it's been extremely difficult on the long and short side," said Richard Suttmeier, chief market strategist at Joseph Stevens. When investors aren't sure which particular stocks or sectors are going to do well or poorly in the short term, ETFs can be a safe bet, whether they want to be short or long on the market. There's sure been plenty of uncertainty in the market lately, with questions about how much the Fed will raise interest rates, how things are going to turn out in Iraq, how fast inflation will return, etc., etc. "Typically, uncertainty is greatest when the market is about to bottom out," he added, saying the relationship between ETF volume and market bottoms seems to have held up fairly well since 2000. "ETFs are really attractive vehicles for investors, large and small, to flee to when they're not sure of the underlying stocks or the market in general." "It's a sign of uncertainty," Goepfert said. The last two times the gap got that big, in early October 2003 and in late March 2004, the market hit a near-term bottom and rebounded, and Goepfert thinks that could happen again soon. The Qubes have been especially active, with the 10-day average of their excess volume outpacing that of the Nasdaq by 27 percent at one point this week, the biggest gap in at least four years. In fact, their excess volume has been stomping that of the underlying indices they're supposed to be mimicking. Michael, Minn., has tracked the 50-day moving average in volume for both ETFs going back to 2000, and both have been exceeding their norms by a wide margin. Jason Goepfert, president and CEO of Sundial Capital Research in St. You can't short-sell other stocks unless their prices are stable or rising.Īctivity in the two most popular ETFs, the Qubes and the Spiders, has been especially high lately. Individual investors like them because they let you play the broader market without having to bother with stock-picking.īig investors like their liquidity - unlike mutual funds, you can trade them all day, and you can sell them short, even if their prices are falling. The DIAMONDS ( DIA: up $0.24 to $100.26, Research, Estimates) track stocks in the Dow Jones industrial average.ĮTFs are a relatively new asset class, but they got popular in a hurry. S&P Depositary Receipts ( SPY: up $0.65 to $110.27, Research, Estimates), commonly called "Spiders," track stocks on the S&P 500. The most active ETF is the Nasdaq 100 Index Tracking Stock ( QQQ: up $0.15 to $35.00, Research, Estimates), commonly called "the Qubes," which tracks the top 100 non-financial stocks in the Nasdaq. Could it also mean the market is about to rebound?Įxchange traded funds (ETFs) are index funds, baskets of stocks and other assets that mimic the movements of big asset groups, including the major stock indexes. It's the kind of activity that often means investors feel they're on shaky ground. Instead, you're probably on the American Stock Exchange, where assets with these goofy names have been trading in recent weeks like they're going out of style.ĮTFs heat up Trading in Qubes, Spiders and Diamonds has been strong lately. If you see Spiders, Diamonds and Qubes flying around you, don't worry you haven't been downloaded, Tron-like, into a video game. Volume has been high in many ETFs, possibly a sign of investor uncertainty, and maybe even a bottom.īy Mark Gongloff, CNN/Money senior writer
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