ETF Dumps Mean Market Pumps

When ETFs dump, get ready for a market pump. As if on cue- when ETFs puke that means the flush is complete- time to buy! Well, usually. We spent a long time researching this and released a big white paper in January studying the effects of an ETF washout. It means there’s a good chance for higher prices ahead. You can read it here.

In late May, we saw a lot of dumping in equities and ETFs. We’ve been very vocal (in our research) that we didn’t expect this selloff to be nearly as deep compared to December. Looking below, you can see how when there are large amounts of ETFs getting sold (red sticks), we tend to see a rip in the market soon after. Late May was the latest ETF dump…interestingly, our data lines up with a recent report of the largest ETF outflow for 2019 occurring in May.

Now, those sell signals are mainly equity ETFs. In times of market stress we also see buying in “safer” ETFs like bonds and precious metals. Below you can see the total ETF signals inclusive of buying. Those big spikes, often, align with market troughs.

Bottom line: when ETFs dump, get ready for the pump.