Retail Investors Ditch ETFs, Stocks (XLF, SPY, DIA, IWM)

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Retail investors ditch stocks and ETFs, even as major indexes rally in New Year.

Retail investors have fled the U.S. stock market and trading activity is at low levels not seen since 2008, withdrawing money from ETFs and mutual funds.

Their action comes as the Dow Jones Industrial Average, SPDR Industrial Average ETF Trust (NYSEARCA:DIA) has gained approximately 5% so far in January, the S&P 500, SPDR S&P 500 Trust (NYSEARCA:SPY) has climbed more than 5%, and the Russell 2000, iShares Russell 2000 (NYSEARCA:IWM) has climbed 5.4%.

However, even more impressive has been the performance of the Financial Sector, Financial Select Sector SPDR (NYSEARCA:XLF) which has gained 9.8% since the beginning of the year.

But the good news has not been reflected in trading volumes as investors remain skittish and afraid of Europe and recent volatility.  New  York Stock Exchange volume is at low levels last seen in 1999.

Bottom line: Times are tough on Wall Street, however, when ETFs and stocks are hated, even in the major indexes, oftentimes this is the best time to buy as the retail investor typically sells at the bottom and buys at the top.

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Disclaimer:  Wall Street Sector Selector actively trades a wide range of exchange traded funds (ETFs) and positions can change at any time.