Extremes in nature equal ends produce; in man they join to some mysterious use.
-- Alexander Pope
NEW YORK (TheStreet) -- With just a short week and a half left of trading for 2012, it is instructive to analyze what's happening to various parts of the market as money positions for the new year. Deeper clarity on the Fiscal Cliff is under way, and money can now plan accordingly for the next four years post U.S. elections. In addition, European markets have been on fire, improving confidence and increasing risk-taking. Momentum on the upside has countered the negative narrative that has been pervasive all year.
So how is price positioning now? Every week I run a screen on the more than 1,000 ETFs/ETNs I track to identify those areas of the investable landscape that are exhibiting extreme price behavior relative to their own respective 20-day moving averages. The idea is to see if there is a message happening beneath the surface of the market by looking at the opposite ends of winners and losers spectrum over a rolling one-month period. Take a look below for the latest results.
The Extreme Winners this week are primarily in the alternative energy space with the Guggenheim Solar ETF (TAN), Global X Uranium ETF (URA), PowerShares WilderHill Clean Energy Portfolio ETF (PBW), Market Vectors Nuclear Energy ETF (NLR) and the Market Vectors Global Alternative Energy ETF (GEX) all among the best performers in the past 20 trading days relative to their respective moving averages. Looking at the charts of many of these ETFs, it is clear the market re-evaluated its bearishness on the alternative-energy space once Obama got re-elected, presumably due to a more alternative-energy friendly environment under his administration. As to the Extreme Losers, it is more of a mixed bag. At the most extreme is the United States Natural Gas Fund LP ETF (UNG), with the iShares Silver Trust ETF (SLV), Market Vectors TR Gold Miners ETF (GDX) and SPDR Gold Shares ETF (GLD) getting hit the most. The weakness coinciding with a breakdown in bonds, like the iShares Barclays 20 Year Treasury Bond Fund ETF (TLT), suggests that this is more due to a flight away from perceived safety trades, rather than due to anything more fundamental on the precious metals front. The bottom line? The market appears to have quickly re-adjusted to alternative energy stock prospects following the mid-November low, and money appears to be continuing its rotation out of perceived safety trades. I suspect a recovery in gold and silver, however, will occur as money treats precious metals less like bonds, and more like cyclically sensitive investments that would benefit in a global risk-on environment for emerging economies. Either way, momentum in the near term seems to be favoring alternative energy the most.
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