'Short' ETFs Lose Favor Even as Stocks Fall

Short-term performance doesn't seem to mean everything to investors in exchange-traded funds, at least so far in 2009. That is an indication from a trend in the dollar volume of trading in January.

Investors weren't turning over shares in less-conventional "short" and "inverse" ETFs at nearly the same pace as they were in late 2008, even though the S&P 500 tumbled more than 8% last month. The more common "long" ETFs held their own -- or even gained in investor interest -- during January.

This incipient phenomenon could be a faint signal that investors are starting to look forward to more stable economic times rather than at spurts in past performance.

For example, while average daily volume of trading in the popular SPDR S&P 500 ETF(SPY Quote) climbed from an average of $28.1 billion in December to $29.6 billion in January, turnover in the ProShares Ultra Short S&P 500(SDS Quote) shrank from $5.4 billion per day to $3.5 billion.

This disparity in relative investor interest came despite a vault of 14.24% in SDS in January and a setback of 8.21% in SPY.

SPY's top holdings include blue-chips Exxon Mobil(XOM Quote), General Electric(GE Quote), AT&T(T Quote) and Microsoft(MSFT Quote).

Similarly, trading volume in the PowerShares QQQ(QQQQ Quote) rose from a daily average of $3.9 billion in December to $4.1 billion in January, while volume in the ProShares Ultra Short QQQ(QID Quote) crumbled from December's average daily rate of $2.8 billion to $1.3 billion in January.

The divergence in their trading volumes occurred even though QID held on to a gain of 0.87% in January while QQQQ skid 2.29%.