"Hitting is an art, but not an exact science." - Rod Carew
As a follow up to my previous article titled "Bond Strength Implications and the Spring Switch", I thought it might be worth taking a look at the other side of what's happened in May not in terms of what's done particularly well (bonds), but what has performed most poorly. I ran a screen on my list of over 1000 ETFs/ETNs to see which are those furthest below their respective 20 day (1 trading month) moving averages. The worst performing areas of the market may surprise you.
It turns out that once again, the best way to bet against Europe turns out to be by betting against solar energy stocks through ETFs such as KWT and TAN given reliance on government subsidies, and faltering Oil prices. Coal ETFs such as KOL and PKOL also took it on the chin as natural gas prices rebounded and as more and more Utilities have switched away from coal in terms of electricity creation. Russia took a hit primarily because on continued protests and political unrest over Putin coming back to office as money flees the country.
The S&P International Financial Sector ETF (IPF) has low volume, but the decline should come as no surprise given that financial institutions outside the U.S. are vulnerable to Europe and a potential Greece exit to come. The message behind this list though is interesting for those speculating on a recovery in broader equities. It stands to reason that those areas most hit in this correction stand a good chance of coming back the strongest on any kind of a mean reversion moment in equities. The implication? Alternative energy may be an interesting trade as risk-sentiment (eventually) improves.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Pension Partners, LLC, and/or its clients may hold positions in securities mentioned in this article at time of writing.