Billions of dollars bail on this once-hot trade

Money is flying out of a once-popular bet on Japan.

The WisdomTree Japan Hedged Equity ETF (DXJ), which combines a long position on Japanese stocks with a short position on the Japanese yen, has seen major outflows this year. On net, $2.7 billion worth of the DXJ has been redeemed this year, which is the largest amount of redemptions suffered by any ETF, according to data from

"We saw all of this hot money come in, and now we're watching the reverse, as all of it floods out," Eddy Elfenbein, editor of the "Crossing Wall Street" blog, said Monday on CNBC's "Trading Nation."

Elfenbein added a warning: "Just because a great trade goes all the way back to square one, doesn't mean it's a great trade again. I would stay away from this ETF."

Indeed, the DXJ has not been a particularly great place to have money invested of late. After a massive rally from November 2012 into mid-2013 and another period of significant gains in the first half of 2015, the DXJ has fallen 20 percent since the start of December (even after a substantial bounce from its February lows). This happened as both legs of the trade — the long-Japanese-stocks side and the short-Japanese-yen side — have turned the wrong way.

Not only did this send the ETF lower, but it threw its very thesis into question. Since the yen has risen this year despite further easing efforts from the Bank of Japan, the "currency-hedged" aspect that once increased gains now amplifies losses.

As Elfenbein suggested, the current outflows are a significant shift for the ETF. In 2013, the DXJ was topped on the list of biggest recipients of net inflows only by the SPDR S&P 500 ETF (SPY).

Now, it would appear that the so-called "hot money" is off searching for the next trendy trade. That currently appears to be gold. The SPDR Gold ETF (GLD) leads the 2016 net inflows list with $5.2 billion worth of creations.

Read MoreBy this measure, stocks are a crazy bargain


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more