Broad-based VTI is raking in cash month-to-date, even as traders flee S&P trackers
The month of October has a (somewhat deservedly) "spooky" reputation for stocks -- and although the S&P 500 Index (SPX) is narrowly above breakeven on a month-to-date basis, as of this writing, investors have been pulling capital out of its well-known exchange-traded fund (ETF) tracker, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). Through Wednesday, Oct. 16, data from etf.com shows net outflows of $863.50 million for SPY -- and even more staggering are the $2.54 billion in net outflows from one of SPY's "clone" ETFs, the Vanguard S&P 500 ETF (NYSEARCA:VOO).
Those VOO outflows currently represent the biggest month-to-date redemptions among all ETFs -- and they easily outweigh the respectable October inflows racked up by another low-priced SPY competitor, the iShares Core S&P 500 ETF (NYSEARCA:IVV), at $1.27 billion. The net "haul" so far this month for the "three ETF horsemen of the S&P"? Outflows in excess of $2.13 billion. That translates into $177 million collectively yanked out of S&P trackers each trading day of October so far.
While there's no single equity ETF that has garnered month-to-date inflows on par with VOO's outflows, it's the Vanguard Total Stock Market ETF (NYSEARCA:VTI) that tops the list of creations. VTI garnered net inflows of $1.56 billion during the 12 trading days ending Oct. 16 -- building on the $5.35 billion it raked in during the third quarter (a figure that nearly doubles SPY's July-September net inflows of $2.85 billion).
With no fewer than 3,587 holdings under its umbrella, VTI tracks a considerably wider spread of the U.S. stock market than its S&P 500-focused counterparts -- so perhaps some urge to "diversify" amid the recent bursts of equity volatility has contributed to the fund's increased inflows of late. Whatever the case, VTI has been gaining popularity among options traders, too. Total option open interest of 18,254 contracts arrives in the 100th percentile of its annual range, per Trade-Alert, while total call open interest of 12,897 contracts ranks in the 98th percentile of its own 52-week range.
On a year-to-date basis, VTI is keeping pace with SPY almost exactly, so there's no particular performance gap that investors seem to be playing. In fact, VTI is currently sandwiched in a familiar trading range -- and by the looks of it, this sideways channel could persist quite a bit deeper into the fourth quarter.
The lower rail of this range is defined by the $144-$145 area, which has contained VTI's lows since early August. This is also the current site of VTI's gently upturning 250-day moving average, which briefly acted as resistance in early February before switching roles to support this year's 18.8% gain. Furthermore, the $144 area marked highs for VTI last November and December.
The upper rail, meanwhile, lies 10 points north in the $154-$155 region, which is home to the late-July and mid-September closing highs, and just a shade north of the 20% year-to-date return level. This zone has attracted attention from the aforementioned call players, as well; the December 155 call is the second most popular strike overall, with 2,250 contracts in open interest.
VTI settled last week near the midpoint of this trading range, which has contained the ETF's daily movements for over four months now. While existing support at the lower rail seems solid for now, the shares could be weighted down somewhat by the optimism evidenced in VTI's robust fund flows and call-skewed option volume of late -- which means meaningful upside beyond the upper rail could be hard to come by through the final months of 2019.
Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, October 20.