ETFs have become a key tool for traders and investors alike. In fact, many investors use fund flows in the ETF space to get a feel for where the big money is moving on Wall Street.

With this in mind, we've created a new report capturing the largest creation/redemption activity in the ETF space. The report will be published each Tuesday (Wednesday on holiday weeks).

Largest Net Creations

The Select Sector SPDR—Energy ETF (XLE) saw that largest creation activity for the week ending December 28, 2007, with $1.29 billion in new shares created—a sign that investors expect good things to continue for the energy patch in 2008.

The energy fund was followed by a handful of broad market ETFs, including the iShares Russell 2000 (IWM), the iShares MSCI EAFE (EFA) and iShares MSCI Emerging Markets (EEM) ETFs.

Digging down further, two gold funds make it onto the top 20—the streetTRACKS Gold Trust (GLD) and the Market Vectors Gold Miners ETF (GDX)—possibly in response to the assassination of Benazir Bhutto in Pakistan and the search for "safe haven" assets.

The iShares Nasdaq Biotech (IBB) and Vanguard Total Bond Market (BND) make somewhat surprising appearances on the list—both rank high in the top 20 despite relatively low net asset counts ($1.5 and 1.0 billion, respectively).

Largest Net Redemptions

In terms of net redemptions, investors pulled lots of money out of the two large S&P 500 ETFs last week. The S&P 500 SPDR (SPY) lost nearly $6 billion in redemption activity, while the iShares S&P 500 lost $1.8 billion.

The No. 3 fund on the list is the iShares Dow Jones Select Dividend Index (DVY). That fund is trading at a 52-week low, and a likely explanation for the outflows is that investors were trying to harvest their losses in the fund before the end of 2007. Tax-loss selling is probably to blame for the pull-out in the KBW Regional Banking ETF (KRE), among others, as well.