On the whole, ETF investors went domestic in February and they stuck to the broad index ETFs. Outflows were concentrated in commodities and international ETFs, although smaller and more speculative currency and commodity-related funds did attract inflows.

Investors are moving cash back into the stock market, but they don't know where to put it yet. Plain vanilla index funds saw some of the largest net inflows in February. Of the top 10 ETF inflows, four were broad domestic indexes: SPDR S&P 500 ( SPY), PowerShares QQQ ( QQQQ), iShares Russell 2000 ( IWM) and iShares S&P 500 ( IVV).

Two of the top 10 were bond funds: iShares Barclays 1-3 Year Treasuries ( SHY) and iShares Barclays TIPS ( TIP). There's still widespread concern about inflation, as TIPS and short-term bonds are two ways to defend against rising interest rates.

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Although Vanguard MSCI Emerging Markets ( VWO) had the second-largest inflows last month, it is because the fund continues to attract investors from iShares MSCI Emerging Markets ( EEM) due to superior performance and lower fees. VWO saw $1.149 billion in net inflows, while EEM saw $2.444 billion in net outflows, the largest outflows of any ETF in February. Overall, investors were net sellers of emerging markets.

The other three-largest inflows went to ProShares UltraShort S&P 500 ( SDS), Industrial Select Sector SPDR ( XLI) and Consumer Staples Select Sector SPDR ( XLP).

The flows into SDS are remarkable in that this fund saw assets increase about 17% in February, to a hefty $3.488 billion. That's a large sum for a leveraged ETF; SDS is now almost twice the size of the next largest leveraged equity ETF, the ProShares Ultra Financials ( UYG). Both XLI and XLP have been outperforming in 2010 and investors may be looking for these trends to continue.

Besides the huge outflows from EEM, investors also exited iShares FTSE/Xinhua China 25 ( FXI) and iShares Latin America 40 ( ILF). They also sold SPDR Barclays International Treasury ( BWX) and Market Vectors Gold Miners ( GDX). All of these ETFs are losing their attractiveness due to a higher U.S. dollar, which posed a strong headwind on these sectors.

Investors also piled out of U.S. Natural Gas ( UNG) and U.S. Oil ( USO) as well. UNG was one of the most popular funds in 2009, but investors may have finally tired of betting on this perennially losing sector. However, since the outflows in USO are similar, it's more likely that an institutional investor may have moved out of these funds.

Although not a top 10 outflow, PowerShares DB U.S. Dollar Index Bullish Fund ( UUP) saw significant outflows of $176 million, or nearly 10% of assets, and a similar amount has already flowed out in March, based on the latest figures from the PowerShares Web site.

Despite the money headed out of the international and commodity ETFs, investors sent small amounts into some currency and commodity ETFs. WisdomTree Dreyfus Emerging Currency ( CEW), Market Vectors Junior Gold Miners ( GDXJ) and WisdomTree Dreyfus Chinese Yuan ( CYB) saw inflows of more than $100 million.

Some investors ignored sovereign debt crises in Europe and the tumbling euro, as net inflows into CurrencyShares Euro ( FXE) reached $81 million. That number was almost exactly matched by euro bears, however, who poured $78 million into ProShares UltraShort Euro ( EUO). Given that EUO offer is two times the daily inverse of the change in the euro vs. the U.S. dollar, the net effect is bearish sentiment on the euro.

It appears that many dollar bulls have shifted to euro bearish. Since UUP only offers about 58% exposure to the euro, and it has been the main driver of the fund, it makes sense that aggressive investors would head for the leveraged euro ETF. Also, the funds flowing into CEW and CYB show that it's the euro that is weak, rather than the dollar strong.

Finally, in terms of performance chasing, the biotechnology sector saw money flow into two funds: SPDR S&P Biotech ( XBI) and First Trust NYSE Arca Biotechnology ( FBT). XBI pulled in more total dollars, but FBT, which has been the better performer in 2010, attracted about half as much money, even though it was only about one-fifth the size at the end of January.

PowerShares Dynamic Biotech & Genome ( PBE) outperformed XBI, but still saw net outflows, as did the largest and worst-performing biotech ETF, iShares Nasdaq Biotechnology ( IBB).

Overall, the net flows into biotechnology are too small to be blamed for this year's run-up to date, and much of the move has been acquisition and news related. This suggests biotech's rally could be closer to its beginning than its end.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion was long UUP, QQQQ and TIP.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.