This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Extreme Movers: 'Cliff' Was a Distraction

Work is hard. Distractions are plentiful. And time is short.
--Adam Hochschild

NEW YORK ( TheStreet) -- Markets rocketed in the final trading day of 2012, and rallied strongly on the first of 2013, as the world cheered the Fiscal Cliff deal. Many in the media are claiming the move is a big surprise, but as followers of my writings and Twitter feed know (@pensionpartners), I have been aggressively highlighting the strength various intermarket trends have been expressing.

One of the reasons I was most bullish despite pundit after pundit calling for a collapse in equities was the behavior of various emerging market and cyclical areas of the stock market. It was wildly inconsistent to think markets would break down when those areas most sensitive to global growth were outperforming in December.

That message has been loud and clear above the "fiscal cliff" noise. Every week I run a screen on the over-1,000 ETFs/ETNs I track to identify those areas of the investable landscape 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 dominated by overseas country ETFs and cyclical trades. Vietnam (VNM), Japan (DXJ), Brazil (BRF), Africa (EZA) and China (FXI) are most noticeable on first glance. Because these areas are heavily dependent upon exports, it appears the market is very sharply beginning to re-evaluate the growth slowdown mantra, anticipating a global acceleration in economic activity.

The fact that the market was positively repricing in export growth shows that money was never of the belief that the "fiscal cliff" would cause a collapse in activity. If anything, the market was doing the exact opposite. Furthermore, strength in Autos (CARZ) and Steel (SLX) confirmed the positioning into beta.

As to the Extreme Losers, it is more of a mixed bag, with weakness primarily being expressed in more "risk-off" areas of the market. Longer duration Treasuries (EDV) took it on the chin as the yield curve began steepening, followed by Silver (SLV) as money rotated out of precious metals. Natural Gas (UNG) keeps falling on a supply glut, and the income trade of REITs also lagged, presumably on fear of a removal of the mortgage interest tax deduction as part of a "fiscal cliff" deal. The Yen (FXY) has been in a downtrend of its own on expectations of shock and awe to come from the Bank of Japan to combat deflation in 2013.

The bottom line? Extreme winners were largely cyclical in nature, while extreme losers were mixed, but were more in those areas that equate to "risk-off" trades. Note that all of this was happening while the "fiscal cliff" distraction was under way. While price averages signaled doubt on an absolute level, underneath the surface, money was not afraid to take risk.

If indeed we are in the early stages of a breakout in cyclical areas of the investable landscape, then the rally may have further to run in the weeks ahead.

At the time of publication, the author held no positions in any of the shares mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CARZ $32.69 0.00%
FXI $33.53 0.00%
SLX $29.65 0.00%
VNM $14.42 0.00%
AAPL $93.74 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs