With another day of limit down trading… I’ve decided to take a step back and open up a discussion with my readers. I received an overwhelming response and figured it would be beneficial if I let you in on a little secret

Money flow.

Of course, we see the market is dropping… but large funds are making moves behind the scenes, and when I look at the way capital is flowing in and out of exchange-traded funds (ETFs).

The thing is, when I study the ETF inflows and outflows, I am one step behind… but I do my best to put the pieces of the puzzle together and try to figure out where the best opportunities are.

So what exactly is going on in this market, and what are some of Wall Street’s largest players doing?

 

The Smart Money And Their Moves

 

Some of the worst-performing sectors last week include: gold miners, oil & gas exploration & production, energy, and home construction. Of course, that all makes sense and it’s a signal to me that traders are shaky and looking for other areas to park their cash in.

While the markets got destroyed last week, U.S. equities actually saw net inflows. Nearly $3B flowed into ETFs during the week. What that tells me is despite the influx of sellers… the buyers are willing to step in at these levels.

The breakdown tells us investors and the smart money could be playing for a massive bounce, as U.S. equity ETFs saw net inflows top $8B last week… with a majority of capital flowing into low-cost index ETFs, such as the SPDR S&P 500 ETF (SPY), iShares Core S&p 500 ETF (IVV) and Vanguard S&P 500 ETF (VOO).

On the other hand, market participants seem to be shaky when it comes to international equity ETFs… as more than $4.5B flowed out of the funds. This probably stems from the fact that the coronavirus cases exploded in Europe seemingly overnight, as well as the shut down in Italy.

Of course, there are opportunities out there… but remember, the smart money has deep pockets and for them, it’s easy to continue buying.

The one question many traders have on their minds right now is, “Should we start buying the dip?”

Well, to be frank, I can’t tell you what to do with your money. The only thing I could tell you is what my plans are.

For now, I’m going to remain in cash, but still stalk the market for high-probability setups. You see, patience is key in this market environment… and that means not trying to be a hero at these levels.

At the end of the day, it’s okay to forgo opportunities until things start to make sense. Right now, if you just take a look at some of the ETFs out there… there are so many disconnects.

 

 

Until I see something pop up on my dark pool indicator, I’ll remain on the sidelines… but still watch the markets. If you’re having trouble with this market environment… or took it on the chin, check out this episode of the WealthWise Podcast in which I detail how to develop the right mindset in this market environment.

Author: Taylor Conway

Taylor’s Shadow Trader system allows his subscribers to tap into the hidden corners of Wall Street and to capitalize on “dark pool” trading activity. This powerful "follow the big money" strategy uncovers large trade activity that most regular investors have no access to, but that Taylor’s subscribers receive alerts about. Starting with a small account and trading part time, Taylor rapidly built his personal trading millions using his own proprietary trading systems. Sharp, savvy, and highly driven, Taylor looks for profits in any market condition, bull or bear.

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