I also don't want to change the thread topic here too much. One theme however, throughout, is why dollar-volume would have any predictive ability with ETFs? Grant found an interesting correlation.
One way to look at index ETFs is that their price is simply a convenient way to track an index. The market makers for an ETF do their best to keep the price tracking pretty close to the underlying index or basket of stocks. One could create a factor to calculate this same thing directly from the stocks (in theory). Does the the price of an ETF therefore have any 'new' informational value? No. Also, the price is completely historical. For the technical traders out there, that is all that matters and past prices DO predict the future. As for me, I'm a little skeptical.
Note therefore, that index ETFs don't follow the same rules of supply and demand as regular securities. If there was a huge demand for a security it's price would go up. Conversely, if there was little demand, the price would go down. Index ETFs, however, have their price set 'artificially' to an external index. Index ETF volume is independent of price. If more people buy into an index ETF it's price doesn't necessarily go up (and vice-versa). There is no 'feedback' to influence the volume. Volume becomes almost a true 'independent' variable. Index ETF volume IS new information.
If a lot of people think a stock will go up (or a group of stocks like the S&P500), then they would all buy in hopes of making a profit. However, that profit is put in check by the Adam Smiths supply-demand rules. As they buy the price goes up. As the price goes up their returns go down.
Now, think of the case of an index ETF. A lot of people think the S&P500 will go up and buy SPY. As they buy there is no impact on SPY, or for that matter, no impact on the S&P500. The returns on their bet the S&P500 will go up aren't impacted by this volume.
I conjecture that index ETF volume is a good predictor of market sentiment and could be a future indicator.
As an aside, volume seems to be an under-utilized metric in general. Looking over the algorithms posted on the forums here virtually none use volume to derive factors other than in conjunction with price to get dollar-volume. I randomly took some of my algorithms and globally replaced 'close_price' with 'volume' - even for a factors like returns or volatility. The results were never too dissimilar and, in many cases, actually better. Go figure.