Back in April, I divided all the listed ETFs into Liquidity Tiers, based on their average daily value traded (ADVT).   Each higher tier represents an order of magnitude improvement in ADVT.  I continue to use this method because it results in a bell-shaped distribution, and the use of ADVT overcomes one of the weaknesses of a volume-only approach.

The top two tiers (tiers 8 and 9) are members of the ETF Billion Dollar Club, those ETFs that trade more than $1 billion per day on average.  As it turns out, the next lower tier, which trade more than $100 million per day, are very close to matching the top 8%.

When I first computed the 92-8 rule, 8% resulted in 72 funds.  To make sure this was not a one-month statistical fluke, I continued to monitor trading over the following months and the 92-8 ratio held strong.  It holds once again this month, but growth in the total number of actively listed funds has pushed the quantity to 73.

Here are the Vital Few for November, the 8% of actively listed ETFs that accounted for 92% of all ETF trading activity last month.

Disclosure compliant with FTC 16 CFR Part 255 covering writer, editor, and publisher: Long positions in many of the securities listed.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

There was nothing unique about Friday’s market action.  In fact, it is not uncommon to have 30-50 exchange-traded products (ETPs) without any volume on any given day.  With the current count of listed ETFs and ETNs standing at 851, this means that 5.5% of them had no volume on Friday.

Three of the funds on the list are less than two months old (MCRO, JPX, SMK).  It is understandable that they might occasionally have zero volume given that they are still quite young.  However, the average age of funds on this list is more than 18 months.

HOLDRS Europe 2001 (EKH) is the oldest fund on the list, having been introduced more than eight years ago in January 2001.  There is no excuse for it failing to trade the last two days of the week.  Ten of the funds have been around for more than two years and still can’t manage a trade every day.

In many cases, the zero volume can persist for days.  E-TRACS CMCI Short Platinum Excess Return ETN (PTD) has had zero volume every day since June 10, 2009, more than five weeks.

Here are the 47 ETFs and ETNs with zero volume on Friday.  Be sure to add these to your Do Not Trade list along with all the funds on ETF Deathwatch.

ETFs & ETNs with Zero Volume on 7/17/2009

Disclosure:  no positions

Currently there are 52 funds (including the 10 new launches so far in June) in my IPO group.  The number topped 140 on many occasions in 2008, so the pace of new ETF introductions has certainly slowed down.  The present list contains all ETFs and ETNs introduced since December 1, 2008.  At the end of June, those introduced last December will be moved into other categories.

Here are the top ETF IPOs, ranked by performance from inception through 6/18/09 :

An ETF’s return in its early months is highly dependent on market action and timing of the launch.  The right circumstances can produce some dramatic gains.  Likewise, the bottom of the list is littered with dismal returns.

While the gains in this table look impressive, they pale in comparison to PowerShares DB Crude Oil Double Short ETN (DTO) when it was new.  With a gain in excess of +500% after its launch in June 2008, DTO earned our 2008 Edgy Award for Best New ETF.

Disclosure:  no position

Topping the list this week is SPDR DJ Euro STOXX 50 (FEZ) with a 353% increase in value traded on a -6.3% drop in price.  A quick scan of the table reveals that “distribution” was the name of the game this week, as eight of the listed products underwent price declines.  Rydex S&P Smallcap 600 Pure Value (RZV), a recent market leader, suffered a -13% haircut. 

HOLDRS Software (SWH) was one of the two ETFs in this week’s screen that managed to post a price gain.  It bucked the overall negative trend with a +1.8% advance.  The other gainer, ProShares UltraShort Semiconductors (SSG), was merely exploiting the negative market action.

Five of the products on the list also appeared last week.  They are FEZ, UTH, RZV, DSV, and GAZ.  For reference, SPDR S&P 500 (SPY) lost -4.6% on a -17% change in value traded.

The output in the table above is filtered so that only ETFs and ETNs with an Average Daily Value Traded (ADVT) of at least $1 million the past 21 market days are included.  This includes only those products in the upper ETF Liquidity Tiers and resulted in only 410 (slightly less than 50% of the universe of US-listed ETFs and ETNs) passing the filter this week.  This step eliminates many of the peculiarities associated with low volume securities.

Disclosure: no positions

The ranking is based on a simple comparison of the five-day average value traded (closing price times volume) versus the 50-day average.

Topping the list this week is Claymore/Sabrient Insider (NFO), and MarketVectors Gaming ETF (BJK) appears for the second week in a row.  Two commodity oriented funds making the list turned in gains in excess of +20% for the week: iPath DJ AIG Natural Gas Total Return ETN (GAZ) with a +21.9% return, and MarketVectors Coal ETF (KOL) with a +20.2% return.

The output in the table above is filtered so that only ETFs and ETNs that had an Average Daily Value Traded (ADVT) of at least $1 million for the past 21 market days are included.  This includes only those products in the upper ETF Liquidity Tiers and represents approximately 45% of the universe of US-listed ETFs and ETNs.  This step eliminates many of the peculiarities associated with low volume securities.

Disclosure: no positions

Swine flu related ETFs had a significant increase in trading this week, but not enough to crack the top 10. iShares MSCI Mexico (EWW) is #32 in our rankings with a 58% increase in VT.  One newsworthy ETF, iShares MSCI Taiwan (EWT), made the list with a +12.4% gain for the week and a 104% surge in value traded.

The two most popular ETFs, SPDR S&P 500 (SPY) and PowerShares QQQ (QQQQ), both had 14% declines in value traded.  The value traded in SPY has been under its 50-day moving average for the past 20 market days.

The output in the table above is filtered so that only ETFs and ETNs with an Average Daily Value Traded (ADVT) of at least $1 million for the past 21 market days are included.  This limits the list to only those products in the upper ETF Liquidity Tiers and represents approximately 45% of the universe of US-listed ETFs and ETNs.  This step eliminates many of the peculiarities associated with low volume securities.

Disclosure: long QQQQ

We exclude ETFs and ETNs that did not have an Average Daily Value Traded (ADVT) of at least $1 million for the past 21 market days.  We look only at those products in the upper ETF Liquidity Tiers, which represents approximately 45% of the universe of US-listed ETFs and ETNs.  This step eliminates many of the peculiarities associated with low volume securities.

Currently the list contains a large proportion of small cap and mid cap ETFs.  Of the 389 ETFs and ETNs that passed the ADVT screen, 171 (44%) had a volume increase this week.

Disclosure: no positions

To make today’s list, I used the same filters:

• Long-only equity ETFs and ETNs (bond, currency, commodity, asset allocation, leveraged and inverse ETFs are not compared)
• Only ETFs and ETNs that have been trading for one year

I followed the same process as yesterday, except the final sort was reversed.  For reference: I determined the peak and trough of the past year.  From there, I calculated the total percentage each ETF would need to gain in order to fully recover back to its one-year peak from its one-year low.  This is called the Maximum DrawDown Recovery Factor (MDD-RF in the table below).

Next I calculated the percentage each fund has recaptured as compared to its overall recovery requirements.  In other words, I wanted to know how much of a bounce it has actually had so far versus how much it needs for a total recovery.  The table shows you the ten ETFs which have bounced the least from their low points.

The utilities sectors has clearly not participated in the recent rally, and biotechnology is on the verge of breaking down to new lows.  The alternative energy ETFs, like Claymore/MAC Global Solar Energy (TAN), fell so far, that even with its recent 50% rally, it was only able to retrace ~10% of its overall decline.

The table below was generated from the daily closing prices of the last twelve months, and has not been adjusted for dividends.  The 22.6% bounce of the SPDR S&P 500 (SPY) is included for comparison.  SPY has gained +25.8% from its low, which is 22.6% of the 110.0% gain needed for full recovery.

Disclosure: no positions

To make the list, I first created the following filters:

• Long-only equity ETFs and ETNs (bond, currency, commodity, asset allocation, and inverse ETFs are not compared)
• Only ETFs and ETNs that have been trading for one year

I then determined the peak and trough of the past year.  From there, I calculated the total percentage each ETF would need to gain in order to fully recover back to its one-year peak from its one-year low.  I call this the Maximum DrawDown Recovery Factor (MDD-RF in the table below).

Next I calculated the percentage each fund has recaptured as compared to its overall recovery requirements.  In other words, I wanted to know how much of a bounce it has actually had so far versus how much it needs for a total recovery.  The table shows you the ten ETFs which have bounced the most from their low points.

You can interpret the results at least two different ways, depending on your point of view.  Either 1) these are the ETFs likely to provide the leadership of the next bull market, or 2) they are the ETFs most overbought and vulnerable to a decline.

The table below was generated from the daily closing prices of the last twelve months, and has not been adjusted for dividends.  The 22.6% bounce of the SPDR S&P 500 (SPY) is included for comparison.  SPY has gained +25.8% from its low, which is 22.6% of the 110.0% gain needed for full recovery.

Last week I screened for ETFs with the largest surge in value traded.  There are no overlaps between the two lists.

Disclosure: no positions

To create the list, I first screened for ETFs and ETNs that had an Average Daily Value Traded (ADVT) of at least $1 million for the past 21 market days.  This includes only those products in the upper ETF Liquidity Tiers and represents approximately 45% of the universe of US-listed ETFs and ETNs.  This step eliminates many of the peculiarities associated with low volume securities.

Next, I compared the ADVT of the past week to the 50-day average to determine which ones had the largest spike in the past week – an indication of potential increased interest from investors and traders.

The table below shows the price change for the week along with the ratio of 5-day ADVT to 50-day ADVT expressed as a percentage increase.

Disclosure: no positions