Homebuilders, Banks, Italy And The Fall Melt-Up Return

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 |  Includes: EUFN, EWI, EWY, ITB, KME, PJB, RKH, THD, XBI, XHB
by: Michael A. Gayed, CFA

“Brain research tells us that only 20% of human beings have a sense of irony, which means that 80% of the world takes everything at face value.” - Doug Coupland

Continuing along the theme that the December to Remember Breakdown is now likely off the table and that the Fed has brought back the Fall Melt-Up as per my last article, I wanted to put a spotlight on those areas of the investable landscape which are showing relatively significant pricing behavior. I run a screen on a list of over 1,000 ETFs/ETNs to find those areas of the market which are furthest away from their respective 20-day moving averages. See below.

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The great irony in terms of SuperBen and the League of Extraordinary Bankers stepping in last week through global central bank coordination is that the sectors/industries within the market which exhibited the most powerful moves relative to their own history are almost all entirely U.S. based. Home construction and apparently all things banking are the standouts despite action being taken due to Europe's credit crisis. From a domestic standpoint, the magnitude of the strength is likely very bullish and confirms animal spirits are coming back, and in all places within U.S. economically-sensitive centric areas of the market.

Its also worth noting that Italy just barely made the list. This should make sense given the substantial drop in yields off the spike highs that were hit just before central bank intervention took place. Italy's stock market has been among the worst performers this year, and it appears that the continuation of the Fall Melt-Up likely manifests most strongly in areas where bearishness has been consistently most high from a country (PIIGS) and sector (homebuilders/financials) perspective.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.