Trader Talk

Traders Play Catch-Up in Materials, Financials

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Can the rally continue? Over the weekend, lots of discussion about the two issues holding stocks back:

1. higher funding costs/euro breakup

2. weaker macro environment

The market certainly believes problem 1) is at least being addressed, but problem 2) has not seen much improvement. Europe still weak, China data has been terrible. (Read more: )

Still, look at the market action: risk on is back, and a lot of people who were not on board with the rally last week seem to be looking for an excuse to add exposure. (Read more: Stocks Trade Flat; Techs Lag, Telecoms Gain)

So, look for signs of traders playing catch-up. A few examples:

1) Metals & Mining ETF again with big volume today, after moving up about 5 percent over the last four days of last week on very heavy volume.

2) look at Cliffs Natural Resources, a big manufacturer of iron ore pellets.

The news is not good. Chinese steel exports, for example, were down in August. Pricing is down. CLF gets almost 30 percent of its revenues from China.

Six of 18 analysts have that cover CLF have lowered their price target in the last month, according to S&P Capital IQ. Goldman Sachs downgraded them today on weaker pricing for iron ore.

Yet, in the last few days everyone has been falling all over themselves to buy this company. It ended the week up 11 percent! Volume on Friday, at nearly 16 million shares, was the highest in years.

3) There's also been increased interest in broader indices like the Russell 1000 Value Index, where Financials and Energy stocks are 44 percent of the weighting. That index powered to a 4-year high last week.

—By CNBC’s Bob Pisani

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