Eoin Treacy's view

I yesterday’s commentary I covered some of the largest overextensions relative to the 200-day MA, both above and below it, for the S&P 500. At this time of year with some big decisions by US investors on their capital gains tax liability the potential for accelerated moves to reverse increases. 

I created this spreadsheet for the FTSE-350 ranking the constituents by their respective overextensions relative to the trend mean. 

What immediately stands out has been the outperformance of the industrial mining sector this year. Earnings have been flattered by the devaluation of the Pound while prices for the individual metals have been trending steadily higher for the most of the year.  The FTSE-350 Mining Index is up 100% year to date. The advance has occurred from deeply depressed levels and the benefit of the doubt can continue to be given the upside provided it holds above the trend mean following any pullback. 




Iron-ore miners have led the charge with Ferrexpo up 522% this year, Anglo American up 287% and Evraz up 199%. Iron-ore tends to make a lot of headlines because the price has doubled this year. However while there is potential for a pullback which would close the wide overextension relative to the trend means there broader point is that these shares were incredibly depressed at the end of last year and are still in recovery mode. 2017 is unlikely to represent similar advances to what were seen in 2016 because prices are higher now but it there is no reason to believe the previous five -year downtrend is about to be reasserted. 


Banks like Metro Bank and Barclays also sort to the top of the table with substantial rallies from depressed levels this year that outperformed the market by a wide margin. While the medium-term outlook for US banks remains bullish the picture for UK operations is less clear and there is scope for some consolidation of recent gains. 

UAE hospital group NMC Health is somewhat overextended right now (25.80%) but a break in the medium-term progression of higher reaction lows would be required to question medium-term upside potential.   


At the other end of the spectrum financial gambling companies CMC Markets and IG Group Holdings collapsed at the beginning of December. This followed announcements by the UK regulator that it was going to limit the ability of UK traders to use leverage and for retail investors to lose more than they put in which would of course result in higher margin requirements. There is some debate about whether the rules will also apply to the company’s substantial European CFD businesses and the shares have at least stabilised over the last couple of weeks.  

International Personal Finance with its focus on Eastern Europe and Mexico has been hit both by proposed law changes in Poland and Mexico’s economic woes. The share has been trending lower for four years and plunged again at the beginning of December. It has stabilised over the last couple of weeks and potential for a reversionary rally has improved. Nevertheless it has a lot of work to do before we could conclude a return to demand dominance beyond the short-term is credible. 

Following an impressive start to the year many precious metal mining companies have given up much of their advances with Acacia Mining and Fresnillo exhibiting wide overextensions relative to their respective 200-day MAs. Fresnillo almost halved from its July peak and has found at least near-term supper in the region of 100p. 

Acacia Mining has also bounced this week.