The following is Slide 15 of a 29 slide presentation that John Kosar, CMT, made on April 12th to the Pittsburgh Chartered Financial Analyst (CFA) Society.  

The chart highlights contracting investor assets in two key US stock market ETFs: The ProShares QQQ which tracks the market leading NASDAQ 100 and the SPDR S&P 500 (SPY) which tracks the S&P 500 (SPX).

Algorithmic and high frequency trading has greatly increased intraday volatility in many financial asset prices so that making investment decisions solely on the price of an asset isn’t good enough anymore.  The big breakout that you saw in a particular stock or index two days ago can quickly disappear, and even violently reverse, as these trading programs take advantage of our own fear and greed, enticing investors to make the wrong decisions at key market turning points.

Because of this new obstacle for investors to deal with, Asbury Research has accumulated a large and growing database of difficult-to-get ETF asset flows data.  Unlike trading volume, which just measures day-to-day investor urgency, total net assets show investor conviction in a price move as it indicates positions actually being held overnight.

Accordingly, we use these ETF asset flows data as a kind of lie detector test for the market, to separate these erratic, and often meaningless, algorithm-generated day-to-day movements in price from real trend changes that provide intermediate to long term opportunities for investors.

Asbury Research subscribers can request a copy of the entire April 12th CFA Society presentation by emailing us or by calling 888-960-0005.

Non-subscribers can request more information about us, including service and pricing options, by visiting our Contact Us page or by calling 888-960-0005.