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ETFs held up remarkably well during the sale

Effectiveness of the ETF.

This became a notable theme during last week's sales wave, according to industry leaders. The action marked the worst week of performance in the US stock market since the depths of the 2008 financial crisis, fueled by fears surrounding the global spread of the coronavirus.

"There are 2,400 ETFs," Chris Hempstead, director of institutional business development at IndexIQ, told CNBC "ETF Edge" on Monday. "They all held up remarkably well. … Everything has stood up really well in this market, and the verbiage that was communicated to me by the liquidity providers was" orderly ", and that is important."

Orderly trading has indeed been rare since the market entered correctional territory last week, with the Dow Jones Industrial Average posting its biggest one-day loss at a point in history Thursday, 96 % of the S&P 500 going into correction on Friday and trading platforms such as Robinhood. system-wide failures.

Stocks rebounded Monday to try to recover from the pain, with the Dow closing 5.1% or 1,293.96 points more, its biggest gain in a day, and the S&P and the Nasdaq Composite climbing 4 respectively , 6% and 4.5%.

Amid all the confusion and fear with $ 986 billion of US stocks changing hands on Friday, the largest dollar value ever traded, according to Goldman Sachs ETF, has become a particularly effective trading vehicle, a said Hempstead.

"(The) highest theoretical trading day of all time, … these products held up perfectly, exactly as they should," he said, wearing his hat on volatility trading products such as the short-term daily 2x VIX ETN from VelocityShares. (TVIX) and iPath Series B S&P 500 VIX Short Term Term Futures (VXX) from Barclays as well as its own firm IQ Merger Arbitrage ETF (MNA).

Nick Colas, the co-founder of DataTrek Research, agreed with Hempstead, noting that even though high-yielding ETFs such as the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) sold weekly last, the stock "did not have a profound effect on the high-yield market" as a whole. HYG hit a new 52-week low on Monday.

"Trading has held up very well," Colas said in the same interview with "ETF Edge".

Now he advises clients to monitor two key levels of the Cboe volatility index, also known as the VIX or market fear indicator.

"We have given our customers two levels to test on the VIX. The first is 42," said Colas. "(If) the VIX exceeds 42, you buy."

The VIX hit 49.48 on Friday, the highest level in the index since 2009. On Monday, it fell to close to 32 at the close.

"This is one of the reasons why we are getting the rebound today," Colas said of Friday's VIX spike.

"The second level where you stack up is 55 and over. It's a real crisis, down 5%," he said. "It shouldn't happen, but it did happen for most of the fourth quarter of 2008. You buy at these levels, you wait three to six months, you have a gain. So those are the two levels at watch for a bounce. "

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