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JUL 14, 2016

S3 BLACKLIGHT: Market Rally Produces $15 Billion of Positive Index ETF Activity

With the S&P and NASDAQ rallying over 1.5% this week and both hitting historical highs today, activity in the major market index ETF’s have been very active with buys (ETF inflows) and short covering totaling $15 billion this week.

The Spider S&P 500 ETF (SPY US) was the biggest mover, as expected, with $6 billion of new ETF inflows and $3.8 billion of short buy to covers. A distant second and third were the IShares Russell 2000 ETF (IWM US) which had $1.7 billion of ETF inflows and $1.7 billion of short buy to covers and the Powershares Nasdaq 100 ETF (QQQ US) which had $937 million of ETF inflows and $521 of short buy to covers.

Total SPY short interest is down to $55 billion, a drop of 4% this month while the IWM short interest was down 5% this month to $12.6 billion. The QQQ had the biggest percentage drop this month of the three major market ETF’s with a drop of 20% to $4.9 billion.

With markets rallying, and the post-Brexit hangover a non-event investors are closing down the hedges they put on in late June in anticipation of a negative market reaction. On the long side, investors remain bullish with worldwide positive economic news. With the Bank of England leaving rates unchanged, Prime Minister Abe’s victory assuring more stimulus measures in Japan and strong U.S. jobs data investors are getting positive reinforcement in every major trading region.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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