Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The past few days there has been a distinct rotation out of some of the stronger areas of the market and into the “China/QE” trade – namely commodities, chemicals, steels, coal, and the like. In light of the news coming out of China the past few days (Chinese imports/exports yesterday were awful) the trade is almost bewildering based on current fundamentals but if you believe the market is discounting the future, this rotation is saying things will improve down the road. Or it could simply be the anti dollar trade – i.e. QE.Of course this EXACT same trade happened in late July/early August after Draghi’s comments, only to crumble after mid August. But on the healthy side, as some sectors of the market retreat there is always something working for that day so the rotation is something a bull would want to see over the long run. You can also see how dangerous it makes to short even the “weak” sectors because once money rotates into them the moves are vicious. Many of these eliminated three weeks of losses in 3 sessions.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
