Don’t be fooled by the market’s top performers—it’s just a dead cat bounce: Traders

The S&P 500 has surged 17 percent from its February lows and a handful of stocks have rallied with it. But are the market's best-performing stocks an accurate indicator of the S&P 500's strength?

According to some traders, not at all.

Though Chesapeake Energy, Freeport-McMoRan and ONEOK are the S&P 500's best performing stocks since Feb. 11, "Crossing Wall Street" blog editor Eddy Elfenbein believes all is not as it seems.

"These are extreme dead cat bounces," Elfenbein said on CNBC's "Power Lunch." "Chesapeake Energy [for example] is up a huge percent, [but] remember, it's gone from being down 98 percent, now it's only down 93 percent."

Elfenbein points out that these companies' surge is commodities-related, taking advantage of the bounce in oil and metals that began in mid-February. The rebound helped Chesapeake Energy surge 185 percent since February, with Freeport-McMoRan following at 143. Oil and gas producer ONEOK is the third best-performing stock on the S&P 500 with a 134 percent surge in the period.

"They've ridden that bounce from extreme oversold levels," added Elfenbein. "So now they're basically very big bets on the future of commodity prices."

Boris Schlossberg, managing director of FX strategy for BK Asset Management, also believes that the surges need to be viewed in the commodities space.

"It is a bounce based on the commodities bounce," he said. "The key question is: How do you view commodities right now?" The CRB commodities index, which measures a basket of commodities, officially entered a bull market this week, up more than 20 percent from its low.

Schlossberg points to a possible increase in China's import data that could suggest that the country's industrial sector may push up demand for oil and metals. This, in turn, could help commodities-driven companies in the U.S. as crude and gold, in particular, continue their climb.

"This whole commodities rally could have more legs going forward, and that could keep those stocks up," he added.

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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

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