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SPY’s Volume Speaks Volumes

I do not claim to be an avid student of market volume, and most market technicians would refrain from calling me an expert on the subject. However, I have enough knowledge on the matter to notice a few things once in a while. With this disclosure out of the way, I will now tell you what I have been observing. There are myriad volume measurements and statistics. There is the NYSE volume, NASDAQ volume, and let’s not forget BATS volume. For those of you not familiar with BATS, it is the third largest U.S. exchange. BATS captured a 22.0% market share of all U.S. equity trades in the month of August, so it is a name you should become familiar with. There are also statistics on up volume, down volume, and unchanged volume for each exchange. Many traders rely on volume indicators such as “on-balance volume” to guide their trading. Today, I want to focus on the volume of a single security – the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ). It is the most heavily traded equity on the planet. It is just one of the more than 1,760 ETFs that are listed for trading in the U.S., yet it captured 35.2% of all ETF dollar volume in August. SPY trading averaged $35 billion per day last month, more than seven times the daily amount of the PowerShares QQQ Trust ETF (NASDAQ: QQQ ), the second most traded equity security. Meanwhile, Apple (NASDAQ: AAPL ), the most actively traded stock by dollar volume, averaged just $8.6 billion per day. Given the importance of SPY as a security, the importance of its volume is elevated, in my opinion. Earlier this week, many financial commentators were attempting to ascribe enormous bullish action to Tuesday’s +2.5% surge in the S&P 500 index, accompanied by an 11.6% bump in NYSE volume and a 12.1% rise in NASDAQ volume. However, I saw something different. The volume of SPY did not increase. It went the other direction and did so in an unambiguous way. The volume of SPY declined more than 43% versus the previous day. Additionally, that 2.5% rise in price came on the lowest volume in the past fourteen trading days. Not since August 18, before the market went into its recent tailspin, has SPY traded on lower volume than it did on Tuesday. Given the fact that most of the recent down days for SPY have occurred on increasing volume while up days have seen declining volume, I’m not ready to get bullish on SPY just yet. Additionally, since I believe SPY is one of the most important securities, I’m going to remain cautious on the overall market for the time being. Disclosure covering writer: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Virtus Launches First Fund In Partnership With Aviva

By DailyAlts Staff Virtus Investment Partners and Aviva Investors announced their plans to collaborate on the development and launch of “multi-strategy, outcome-oriented” mutual funds back in January . Seven months later, the collaboration has borne fruit in the form of the Virtus Multi-Strategy Target Return Fund (MUTF: VMSIX ). The fund, which is expected to be just the first of several launched by the Virtus-Aviva partnership, has a very specific target: It aims to provide returns equal to those of global equities while enduring less than half the risk, as measured over rolling three-year periods. This objective is pursued through the implementation of multiple strategies of the fund’s subadvisor, Aviva Investors, which include investments in fixed income, currencies, equity, convertibles, money market instruments, ETFs, derivatives and more. “We are excited by the opportunity to provide compelling solutions for financial advisors that utilize Aviva Investors’ broad outcome-oriented capabilities,” Virtus CEO Geroge Aylward said earlier this year in a statement announcing the partnership. He also said Virtus was “particularly pleased” to work with Aviva CEO Euan Munro, whom Mr. Aylward referred to as “a pioneer in the development of liquid multi-strategy investment solutions.” Mr. Munro is part of the four-man team from Aviva charged with managing the Virtus Multi-Strategy Target Return Fund. The other managers include Peter Fitzgerald, Dan James, and Ian Pizer. “Our companies share a similar commitment to developing and offering innovative investment options by focusing on client outcomes,” Mr. Munro said, back in January. He also explained Aviva’s client-centric approach to developing well-managed portfolios, and Virtus’s ability to “effectively articulate sophisticated investment strategies” to financial advisors and their clients. To articulate the Virtus Multi-Strategy Target Return Fund’s sophisticated strategies, Virtus has produced a fact sheet and other materials outlining the fund’s three-step investment process: Develop a macro house view Bottom-up investment process dividing opportunities into three buckets: Contrarian strategies (driven by differences in Aviva’s macro view vs. the market’s); Arbitrage strategies (driven by what Aviva perceives as market mispricings); and Risk-reducing strategies (strategies intended to do well in times of market stress, including if Aviva’s views don’t play out). Combine quantitative risk modeling and qualitative assessments for construction of a portfolio with 25-35 strategies, based on a “contribution-to-risk” framework. Shares of the Virtus Multi-Strategy Target Return Fund are available in three classes: A (MUTF: VMSAX ), C (MUTF: VCMSX ), and I (VMSIX), with a management fee of 1.30% and respective net-expense ratios of 1.80%, 2.55%, and 1.55%. A- and C-class shares require a minimum initial investment of $2,500; I-class shares have a minimum of $100,000.

Addicted To Energy Investing, Like CRAK

Summary Refineries have been the one bright spot for oil and gas investing lately. A new ETF captures the investment trend but still requires considerable monitoring by the investor. CRAK offers both U.S. and global refiners exposure, which offers diversification but also additional information needs. I couldn’t help myself, a chance to add levity in the face of oil market woes and gyrations. Then it appeared on my radar. CRAK . No, not the “Breaking Bad” sort, but the recently launched ETF. We know how horribly the oil and gas sector has fared, save the refiners. Well now you can own a “slice” of CRAK for your energy or retirement portfolio. I acknowledge the ETF trading issues revealed in the last couple of weeks as markets took a dive, hence the slice approach to this segment for the non-fainthearted. The fund Market Vectors Oil Refiners ETF ((Pending: CRAK )) launched 8/18/2015, right in lock step with the observed trend that refiners were performing better than other energy sub-sectors. (click to enlarge) Source: here . What are drivers? One driver behind the profitability in the sector is lower oil prices. Lower oil prices result in lower input prices, which can lead to higher margins. The fund says, “Unlike other energy sector segments, oil refiners may benefit from lower oil prices if crack spreads remain attractive.” Crack spreads are the differentials between oil prices and the refined products. In the U.S., product growth have been playing a role as well. Furthermore, the U.S. Energy Information Administration (NYSEMKT: EIA ) says: (As of July EIA estimates) that refinery runs will average 16.7 million b/d from April through September and then decline slightly in the fourth quarter to 16.2 million b/d before falling further to 15.8 million b/d in the first quarter of 2016. Following the winter period of lower demand and refinery maintenance, EIA’s expects U.S. refinery runs will reach new highs next summer, averaging 16.9 million b/d in third quarter of 2016. Low oil prices are expected to keep demand for gasoline slightly increasing in 2016. Recent EIA U.S. crude production estimates suggest slightly lower production but prices are expected to stay soft longer than previously expected given overall anticipated global supply. The EIA notes in a May report that increasing U.S. shale oil production is expected to lead to a decline in crude imports, an increase in refinery runs, new investments to expand refinery capacity, and higher crude and refined petroleum product exports. This is the expectation to the year 2025 under three general scenarios: 1) Low crude production under current export restrictions (10.9 million bbl/d in 2025) 2) High crude production without export restrictions (14.7 million bbl/d in 2025) 3) High crude production with current export restrictions (14.7 million bbl/d in 2025) The cases follow, in order from left to right: (click to enlarge) About CRAK The fund tracks the pure-play index (MVCRAKTR) comprised of companies that generate at least 50% of their revenue from crude oil refining, including oil, naphtha and other petrochemicals. It tracks the performance of the largest and most liquid companies in the global oil refining segment. The global firms included in the tracked index come from the following countries: Another way to view these country weightings is based on their expected growth rates, or GDP. This offers an indication as to whether these segments have growth prospects within a country context. Estimates for the U.S. are 2.4% for 2015; Japan 0.8%; India 7.5%; S. Korea 2.6%; Poland 3.4% and Taiwan 3.4%, to name a few (source: The Economist, Sept. 5, 2015, p 88). Thinking about this another way, the ETF offers exposure to energy-related infrastructure in economies with reasonable growth, for now. But it’s a little more complicated than that. Specific companies included in the index: (click to enlarge) Source detail: here . Considering the five U.S. refiners – Phillips (NYSE: PSX ), Marathon Petroleum (NYSE: MPC ), Valero Energy (NYSE: VLO ), Tesoro (NYSE: TSO ) and Holly Corp (NYSE: HFC ) – let’s look at their performance at a time of rising oil prices from 2013 to the peak of July 2014, and then down. (click to enlarge) Bloomberg offers a view of Reliance Industries vs. Phillips and Valero. (click to enlarge) This table shows the performance of the tracked index in comparison with FRAK , just for grins, as of 9/09/2015. (click to enlarge) (click to enlarge) Source: here. Findings I understand the immediate appeal of a swathe of exposure to the better performing segment of the oil and gas industry. The first performance chart is no longer the whole story however, given a nearly 6% decline in the last month for CRAK’s tracker index, MYCRAKTR. Some recovery is evident from the index performance above. While I have illustrated a broad brush stroke of the dynamics related to an ETF approach and refiners, serious complexity is involved in these dynamics. For example , from the EIA: Higher demand for gasoline is supporting these margins (from years of higher distillate crack spreads followed now by gasoline). U.S. gasoline product supplied is up 2.9% through the first five months of 2015; demand is also higher in major world markets such as Europe and India so far this year compared with 2014. Total U.S. petroleum product supplied (a proxy for demand) is up 2.5% through the first five months of the year compared with 2014… (Net) exports are 19% higher this year through May. Thus, investors interested in this ETF approach need to be monitoring variables such as oil prices, crack spreads, product exports and both domestic and global economic demand forecasts, at minimum. Some suggest that refinery investment exposure belongs to the traders owing to cyclicality, and one can see why this is so. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.