Looking through the final figures for fund flows among the most active ETFs for May, a few things stick out.
The most notable is the abandonment of gold-related funds. The GLD fund suffered outflows, as did the gold miners, GDX and GDXJ. With more than $1.5 billion leaving those funds over the past 20 days at the end of May, the outflow was one of the
largest in the past five years.
The chart below shows the combined flow from those three gold-related funds, compared to the price of the gold miners fund, GDX.
There were a few failures, but mostly when the outflow got this large, it was a contrary signal for GDX, and gold miners tended to rally from such an exodus.
Of the 14 times that the combined flow in those fund exceeded – $1.5 billion, GDX rallied over the next 1-3 months 10 times, and failed to see any upside 4 times. It just recently exceeded that threshold again, suggesting a higher probability of a rally than a failure.
Other funds that showed an extreme flow were junk bonds, which we look at in the May 14 report. The outflow has been staunched since then, but it was still extreme for the month.
Also interest-rate related, the Vanguard REIT fund, VNQ, suffered its worst 20-day outflow in at least 10 years, nearing $1 billion. The previous record was just over $900 million in June 2013, preceding an approximately 10% rally in the fund over the
next couple of months.
On the other side of the ledger, the biggest winners in terms of inflows were health care, technology and China. FXI (China) enjoyed its largest 20-day inflow since January 2013. While it has seen larger inflows in its history, the way it has been going
over the past week, it could quickly match or exceed its prior extremes.
Over the past few years, big inflows have tended to lead to periods of declining prices for FXI, so something to watch for traders in that fund.