Over the last 4 months especially, a lot of the daily trading volume has flowed away from individual stocks and into ETFs. A lot of these ETFs are also leveraged instruments which makes for much more erratic intraday movements for the individual stock daytrader such as myself. A lot of these derivative instruments went from being the side bet to the main pot. I can only hope it gets better and money flows back into individual stocks, but below is a simple hypothesis as to why the money and trading has flowed in this direction.
Any bet is essentially the same. You want to be in a position with the most ways to win. As in poker, it doesn't necessarily matter the situation on the flop, as much as how many outs you have. I remember back in early 2007 I recommended people buy the oil services holders ETF (OIH) because there were two ways to win at the time. If oil went up OIH went up with the oil prices while if oil went down the Dow tended to go up and since all the components were NYSE stocks there wouldn't be much downward pressure. I'm not sure if OIH outperformed at that time, but I did feel that it was the safest bet as there were two ways to win, one to lose (if both oil and stocks fell).
On the downside as the markets plunged the last year, it appears a similar idea is in order. In the bear market as opposed to the bull market, it's about finding as few ways to lose as possible. Consider the old adage that a stock's move is 40% based on the stock itself, 30% based on the market, and 30% based on the industry. That's 3 things that can go wrong on any given day. So how do we minimize what can go wrong? Eliminate the stock and the industry. It first began with the increase in trading of financial industry ETFs such as SKF and XLF over the individual stocks. Now, the SPYs are doing an average daily volume (3 months) of over 400 million shares a day. Maybe continued high volume in these "whole market" instruments will be an indicator that the bear market has further to go.
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