Macro Wrap – Up is Down, Red is Green, $TSLA, $NFLX, $QIHU

by Enis November 7, 2013 6:21 am • Commentary

The most glaring aspect of the price action on my board yesterday was the dichotomy in performance between the year-to-date winners and the year-to-date lowers.  The biggest losers yesterday were a who’s-who of best performers in 2013.  From my own screen:

  • Biotech ETF, XBI, down 3.7%
  • PCLN down 2.25%
  • EOG down 1.7%
  • NFLX down 1.7%
  • LNKD down 1.7%
  • FB down 2%
  • QIHU down 5.4%
  • YELP down 6.4%
  • BBY down 5.3%
  • DAL down 2.1%
  • And of course, TSLA down 14.5%

Meanwhile, the S&P 500 index was up 0.5%, the DJIA was up 0.8%, and the Russell 2000 small cap index was down almost 0.5%.  The team at Bespoke noticed the same thing, and pointed out that it applied to sector performance yesterday as well:

Basically, anything that has had a good year in 2013 ended up underperforming today, while 2013’s losers saw lots of buying.  As shown below, the areas of the market that are up the most YTD were either down big or up just marginally, while the areas that have been weak this year had stellar days.

Screen Shot 2013-11-07 at 6.05.50 AM

Fundamentals didn’t happen to change all at the same time for all those YTD winners and losers.  Rather, it’s a simple example of how portfolio positioning can cause short-term moves, particularly towards the end of the year, as portfolio managers rebalance their portfolios with their eye on 2014.

While traders all noticed similar price action yesterday, it’s less clear whether it’s healthy rotation are ominous distribution.  Passing the leadership baton has been a pattern throughout the year, so this might simply be the case of large-cap underperformers taking up the bullish cause.  It could also be a gradual flight to safety (and value), and away from riskier growth.  While we’ll only know the broader implications in hindsight, what is crystal clear to me is that a lot of high fliers now have broken uptrends (see Z from yesterday), and some out-of-favor stocks are breaking out of bases (see GLW from yesterday).  My general bullish/bearish bias is skewed accordingly for now.