"They believed you can't mix rock, country, and rap, and that crossover is dead. I always knew it would work. And it will always work as long as you're really into it and like what you're doing." -- Kid Rock
NEW YORK (
) -- It has been a strong start to 2013, with the
up nearly 4% thus far in January. Risk-on has certainly been the right call exiting last year and entering this one despite the fiscal cliff noise and continued fears over another collapse in equities.
Our ATAC models used for managing our mutual fund and separate accounts have stayed long stocks since late-November, and there are no near-term signs of intermarket deterioration just yet to warrant concern. This has become less of a risk-on/risk-off environment, and more of a risk rotation one.
Within that risk rotation appears to be an eclectic group of winners and losers. Every week I run a screen on the over 1000 ETFs/ETNs I track to identify those areas of the investable landscape which 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 1 month period. Take a look below for the latest results.
The Extreme Winners this week are a mixed bad, with
on absolute fire since December. Interest rate cuts, rising PMI, and expansion by companies looking for cheaper labor than what China has to offer has resulted in a near parabolic move in the country's equity markets over a short period of time.
has also been in a remarkable uptrend, nearly doubling off of the January 2012 low.
has been performing well, in line with outperforming auto stocks as expectations grow for increased demand on the industrial side. On the alternative energy front,
continue to fare nicely on renewed subsidies by the U.S. government and higher Oil prices. Interestingly,
have also started off in a big way emblematic of the risk-on environment we are currently in.
As to the Extreme Losers, quite a few currency pairs relative to the
are showing up. The
has been the big story, given Prime Minster Abe's big push to reflate the third largest economy in the world.
While not as talked about,
and its currency the
are depreciating, lagging most other risk-on markets.
Perhaps the most consistent message seems to be the weakness expressing itself in the bond market, as long Treasury bonds such as the
Vanguard Extended Duration ETF
iShares Barclays 20+ Year Treasury ETF
breakdown on rotation into equities from fixed income investors.
The bottom line? The most recent extreme winners have no major consistency, except in that the areas which are rallying are those which are not highly focused on by the mainstream investor. This appears to be bullish, as it suggests money is comfortable taking risk in areas outside low beta parts of the investable landscape.
On the laggards side, a mix of currencies and bonds seems to suggest continued improvement not just in the U.S. dollar on a relative basis, but also U.S. stock markets which have held up well following the fiscal cliff deal. Risk-on, and in particular risk-rotation, continues unabated...at least for now.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.