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ETFs and Technicals—Pay Attention!

Wednesday, 4 May 2011 | 1:52 PM ET

I spoke this morning with Charles Biderman at TrimTabs about some of the strong volume we have been seeing in a number of ETFs in the past week.

Biderman reiterated a simple theme followed by ETF watchers, and indeed stock watchers in general: the biggest inflows and outflows typically occur at tops and bottoms.

In other words, technicals matter. Keep this maxim in mind when looking at the action in the last two days. Commodities and commodity ETFs are being carefully watched, and with good reason.

Take the Silver ETF . Four points:

1) The ETF has gone parabolic in the last two months, from $30 to about $48;

2) historic highs

3) historic volume;

4) biggest volume on a nearly 9 percent decline on Monday.

Parabolic. Historic highs. Historic volume. Biggest volume on declines. That is a technical red light.

Biderman noted that through the week ending Monday, the SLV has had a decline of about a half-billion dollars in assets. The market value is north of $14 billion, so we are talking about a little over 3 percent decline. It has declined further in the past two days.

Is a 3 percent decline a little, a lot? The answer is, it is enough to sit up and take notice, particularly given the technicals outlined above. We are clearly seeing sell stops hit.

We have also seen notable declines in the ETFs that track stocks of precious metals, such as the Global X Silver Miners and the Market Vectors Gold Miners , also on spikes in volume.

I would also note some weakness in large stock indexes, with one difference. The S&P Midcap 400 was at an historic high a couple days ago...Biderman noted that in the week ending Monday about $238 million had come out of the ETF...about 2 percent of the assets. Again, while two percent is not an avalanche, it is not insignificant...particularly given the historic high. The one caveat I would add is that we are not seeing the massive volume in this ETF that we see, for example, in the SLV.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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