Do You Still Hate the Market?
For the past two weeks, traders have hated the market. And they were right, because stocks dropped and the VIX hit a 13-month high. But with the market rallying off the January 24 SPX low at 4222, the mood has brightened a bit this week. SPX Bulls Coming Back to the Party Our survey has not had more bulls than bears since January 2, 20221. So we can say our community has been pretty accurate in terms of calling the action.Now, 59% of surveyed traders are bullish, which is just slightly below the long-term average of 63%. Bitcoin Sentiment Split Bitcoin has bounced a bit from the January 23 lows, when sentiment bottomed out at 34%. Now, the crowd is split 50-50 between bulls and bears. Apple Bulls Return After Earnings Apple (AAPL) delivered a monster earnings report after the close Thursday and the stock popped nicely. So the mood has gotten much more positive, with 67% of surveyed traders saying they are bullish for the next 30 days. Feeling About Tesla Perk Up Tesla (TSLA) is down almost 20% year-to-date, and that appears to be attracting some traders. 55% of surveyed traders are now bullish, up from just 32% two weeks ago. Gold Bulls Step Away Gold struggled last week, so sentiment on gold soured once again. Now just 53% of surveyed traders are bullish on gold. Traders Still Love Oil Oil has been the place to be in 2022, with XLE up 18.3% and OIH up 23.0%. What Happens Now? For two weeks, we asked the question “Does Negative Sentiment Mean We Are Bottoming Out?” For now, the answer is yes. Now with sentiment in more neutral territory, it will be interesting to see if the market can creep crawling higher.
Continue Reading -->The ARKK ETF Bloodbath: 7 Things You Need to Know
The ARK Innovation ETF (ARKK) was poster child for the post-Pandemic stock boom with its blistering 149% in 2021. Cathie Wood, CEO and CIO of Ark Invest, became a bonafide rockstar in the industry, and some folks thought she could be the next Peter Lynch or Warren Buffett. In February 2020, Bloomberg called her “the best investor you’ve never heard of.” But ARKK has fallen on hard times as expensive growth stocks came back down to Earth. So let’s go through 7 things you need to know about the ARKK ETF. 1) ARKK Invests in “Disruptive Innovation” Few people will ever read the prospectus for an ETF — but we just did. So what is the ARKK ETF all about? ARKK specializes in what it calls “disruptive innovation.” In their words: The Adviser defines “disruptive innovation” as the introduction of a technologically enabled new product or service that potentially changes the way the world works. The Adviser believes that companies relevant to this theme are those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of genomics* (“Genomic Revolution Companies”); innovation in automation and manufacturing (“Automation Transformation Companies”), transportation, energy (“Energy Transformation Companies”), artificial intelligence (“Artificial Intelligence Companies”) and materials; the increased use of shared technology, infrastructure and services (“Next Generation Internet Companies”); and technologies that make financial services more efficient (“Fintech Innovation Companies”). In plain English, this means that ARKK invests in expensive, high-beta tech stocks. And according to the prospectus, ARKK has to invest at least 65% of its assets in companies that follow the “disruptive innovation” theme. This is why ARKK can’t just go to cash like an individual trader might. The fund was launched on October 30, 2014, and currently has $16.1 billion in assets. 2) ARKK Is in Some WILD Stocks You know an ETF is wild when the most stable stock in its top 10 holdings is Tesla (TSLA)! All of ARKK’s top 10 holdings are expensive, high-beta stocks that move really far, really fast: Tesla (TSLA) Zoom (ZM) Teledoc (TDOC) Roku (ROKU) Coinbase (COIN) Exact Sciences (EXAS) Unity Software (U) Spotify (SPOT) Intellia Therapeutics (NTLA) Uipath (PATH) ARKK has a beta of 1.54, meaning for every 1% the S&P 500 moves, ARKK moves 1.54%. That means ARKK moves about 50% faster than the S&P. Unfortunately, since ARKK peaked, those fast moves have been mostly to the downside. 3) ARKK Was In the Right Stocks at the Right Time When COVID-19 hit in early 2020, people began spending way more time at home, particularly for work. That was bad for some sectors like airlines and restaurants. But it benefited some of ARKK’s biggest holdings like Zoom (ZM), Teledoc (TDOC), and Roku (ROKU), all companies which benefited from more people being at home. Plus, ARKK’s biggest holding was Tesla (TSLA), which had a monster 2020. . You can call it luck or skill — but Cathie Wood got in the right names at the right time. 4) The Right Names Became the Wrong Names This chart compares the S&P 500 (on top) with ARKK (on bottom). ARKK peaked at $160 on February 16, 2021… and then started sliding. That was 11 months before the S&P 500 topped out at on January 4, 2022. What happened? Why did ARKK flame out so much earlier? Simple — because as the economy reopened ,“stay at home” names like Zoom (ZM) and Teledoc (TDOC) began dropping. For example, Teledoc has falled 82% off its highs: Traders’ declining tolerance for risky stocks also seemed to be a factor. With the Fed pulling away the punchbowl to fight inflation, traders started shying away from the wild names. So small caps underperformed in 2021, as did the ultra high-valuation tech stocks Cathie Wood favored. New IPO names were also messy. For example, ARKK has been a repeated buyer of Robinhood (HOOD), which has been in a hideous downtrend since its post-IPO peak. Meanwhile, traders were shoveling cash into traditional tech stocks like Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA). Plus, energy, housing, and financials were big outperformers in 2021. You don’t see those types of stocks in ARKK. And in 2022, energy is the only sector that’s shining. OIH is up 24.3% and XLE is up 19.4%, while the S&P 500 is down -9.8%. Meanwhile, ARKK is down 31%. And if we’re considering all-time highs, ARKK is -59.1% off its high, while the SPX is off 10.8%. 5) ARKK’s Long-Term Performance Is Still Pretty Amazing Even with ARKK’s underperformance in 2021 and 2022, the fund is a staggering long-term success According to Morningstar, ARKK has an 5-year average return of 28%, almost doubling its category average. In this chart, ARKK is the blue line, and you can see it’s still way above its category (red line): As of this article, Morningstar rates ARKK as 4 out of 5 stars, putting in the top 32.5% of funds relative to category peers. However, Morningstar ratings are backward looking so they’re not helpful in judging future performance. 6) People Are Waiting for Cathie Wood to Give Up If you follow social media chatter, particularly on Twitter, you’ll know that Cathie Wood has received a lot of criticism for her bold predictions, For example, she recently said Bitcoin could hit $1 million by $2020. Bitcoin would multiply in price 27 fold for that to happen. In late December, she said she expected her strategy to deliver a compound return of 40% over the next five years. That equates to a 460% return. And many traders are desperate to see Wood capitulate and turn bearish, the idea being that if she gives up, high-growth stocks wilh have bottomed. Interestingly, CNBC’s Jim Cramer “drowned” ARKK on his Mad Money show: I’ve disagreed with most of Cathie’s investment theses since last year (been in $SARK since its inception), but this is just brutal after today’s price action… @jimcramer $ARKK $TSLA $COIN $HOOD pic.twitter.com/oJ3YynrGfP —
Continue Reading -->Where is QQQ Going Next?
Last week Sami mentioned that support for QQQ would be at 350. At the start of this week, QQQ is already at support, but that doesn’t mean that it’s going to hold. Find out where he thinks the market is heading next and when it might get there. In this video, Sami explains: – What’s so difficult about Bitcoin – Why this week is harder to predict – Where to place targets for DOGZ – Which pattern can be found in GFI – How OVV compares to USO
Continue Reading -->Sami Abusaad on the Trading Nut Podcast
Want to get to know Sami Abusaad? Then watch his appearance on the Trading Nut Podcast: Sami goes over: The HUGE loss that drive him to get a real trading education How he got started in the industry What it really takes to succeed Why your personality matters HUGE when it comes to being profitable Where people go wrong in trading And MORE!
Continue Reading -->Scott Redler’s Dog Bytes: Sloppy Action in Semis
SPY has had four hard down days since breaking the accelerated trend around $460. That confirmed the Bearish tape after losing the 8/21 day up near $468. We’ll see if we can play some type of oversold bounce today. Let’s see if we reclaim Friday’s low of $437.95. Under there is a micro spot at $432 and then a more major one at $426.The semis got sloppy like most tech sectors. SOXL broke below the 8/21 day and strength was sold all week as it hit $45.81 yesterday. See if there’s a scalp long vs. a 5-15-30 minute low or if it reclaims the $43.42 pivot low from Friday. It’s broken like everything else. NVDA is purely a tactical trade as long as we are in this type of tape. It was rejected last week around $285 and then broke $271. Some did well short. It gave a red to green trade Friday and then rolled over. Maybe there’s an opportunity vs. a 5-15-30 minute low around the 200 day if we get a signal to buy. See if it reclaims Friday’s low at $232.66. AMD lost special status as it broke the 8/21 day around $144 and it has been for sale ever since then. It broke $125 to give clues of more selling in the semis. It gives some two way action like Friday long and short. Now, see if there’s a signal to buy for a red to green trade. The 200 day is right here. See if it reclaims Friday’s low of $118.39.Positions Disclosure as of 1/24/2022 at 8:54 a.m. ET
Continue Reading -->Traders Don’t Want Tesla. They Want Gold
Traders were very bearish last week — and they were right to be negative, because it was another lousy week for the market. In this week’s sentiment survey, the bearishness extended, and we’re at an interesting inflection point — traders are more bullish on gold than on any other asset, including Tesla (TSLA). SPX Bulls Still Hard to Find The S&P 500 is down 8% year-to-date, with major relatives weakness in high-growth stocks. So it’s no surprise traders are bearish, with just 37% of survey respondents bullish on the market for the next 30 days. Bitcoin Sentiment Drops BIG Just 34% of surveyed traders are bullish on Bitcoin, which is no surprise given Bitcoin’s big drop on Saturday. Bitcoin is now down almost 30% year-to-date as risk assets remain out of favor. Apple Sentiment Still Bearish Apple (AAPL) sentiment rebounded from last week’s record low of 37%, but only slightly. Tesla Perks Up, But It’s Still Unloved Tesla (TSLA) also perked up a bit from last week, but not by much. Gold Bulls Are here 71% of survey respondents said they are bullish on gold, making it the most favored asset in this week’s survey. Oil Sentiment Flattish Oil prices and energy stocks have been ripping in 2022, so it’s no surprise traders still like oil. The Big Question, Again: Does Negative Sentiment Mean We Are Bottoming Out? Last week, we asked “Does Negative Sentiment Mean We Are Bottoming Out?” Because the market has a tendency to turn up just when people. And right now, traders clearly favor commodities over risky stocks. For now, traders remain fearful, with SPX futures in the red. But if you’re looking for guidance in this tough market, you can check out this special Sami Abusaad deal.
Continue Reading -->Markets in Turmoil? It’s Ugly Chart Time!
The S&P 500 is down -7.7% so far in 2022, but market participants agree — this is one of the toughest markets in some time. First, let’s get meta. Our last “Markets in Turmoil” article was released on Saturday, December 4, 2021 — the day after the December 3 low in the S&P 500. Since we perfectly bottom-ticked that move, we’re curious to see if the market skyrockets Monday. But for now, things are looking quite shaky with the S&P closing below the 200 day moving average for the first time since June 26, 2020. Interestingly enough, the T3 Live community nailed the downturn. In last weekend’s sentiment survey, just 33% of traders were bullish on the S&P 500 for the next 30 days — a huge decrease from the past few weeks:The Growth Stock EffectCathie Wood’s Ark Innovation ETF (ARKK) was an absolute monster during the initial phases of the COVID-19 pandemic. ARKK was up over 150% in 2020…. but things have certainly gone South, as you can see on the chart: ARKK is now down -24.4% year-to-date and is -55.2% below that $160 high from back in February 2021.With the Fed taking away the punch bowl as rates rise, growth stocks have been torn apart. One prime example is major ARKK holding Robinhood (HOOD), which is down 85% from its post-IPO high of $85: We are also seeing big time weakness in Biotech (IBB): Semiconductors (SMH) were a MASSIVE source of leadership in 2021, rising +41%. But SMH is down -12% in 2022.VIX Approaching December Highs The VIX is up, but even with the growth stock meltdown, it is not quite at the December highs. What does this mean in plain English? Well, the VIX uses prices of various S&P 500 options to measure traders’ expectations of volatility. So traders are showing some fear, but not as much as in early December. Helpful Link: Our Primer on the VIXThe Bitcoin Beatdown Bitcoin is now down -23.8% year-to-date as traders continue to shed risk. No surprise there — and it will be interesting to see if Bitcoin buyers step up to buy the dip. Meanwhile, Ethereum is in even worse shape with a -36.8% YTD drop:Housing Stocks Busted UpFew traders follow housing stocks — but they’ve been a big source of action for the past couple of years. With interest rates spiking, the ITB ETF is now down -16.5% in 2022 after a blistering +48.6% run in 2021.The Ultimate Push PullThe market has two opposing forces at work: Downward Momentum: risk assets are cratering Negative Sentiment: traders are VERY bearish, which typically happens near bottoms, not tops. So the question now is, have we reached the point of maximum fear? Is higher inflation, the supply chain crunch, and a less accommodative Fed all priced in? Let us know in the comments, or by joining the T3 Sentiment Survey Panel!
Continue Reading -->Scott Redler’s Dog Bytes: Nowhere to Hide in Banks
SPX futures are -50 and we’ll see if this ascending channel breaks. Does it stay below 4614 or reclaim it to relieve some pressure? 4582 is support below with major support at 4500. Tech is underperforming and JPM’s action proves you just can’t hide in value or banks.I got out of my banks last Wednesday because I don’t hold through earnings – which is a good thing considering how these names are acting after the prints. JEF and JPM got hit on results. GS under pressure this morning. XLF held the $40.34 pivot. See if that holds. JPM underwhelmed on earnings and had a big gap down with a hole in its chart. Sometimes there is a better entry the week after earnings. See how this handles Friday’s low of $156.90 and I’ll see patiently if I want to enter again. GS failed to impress exactly when Wall Street said you had to be long banks. Now they are testing the 200 day. See if GS can hold the $366 area. Otherwise it can go a lot lower.Positions Disclosure as of 1/18/2022 at 8:51 a.m. ET
Continue Reading -->Traders Hate Tesla and Apple
2022 is starting off on a tough note for stocks, with the S&P 500 dropping -2.2% and growth stocks getting smashed across the board. And our latest sentiment survey reflects the trouble, with traders turning bearish almost across the board… and yes, that includes Tesla (TSLA) and Apple (AAPL). SPX Bulls Disappear January tends to be a good month for stocks, but the tough action has traders VERY skeptical. Just 33% of survey respondents are bullish on the SPX for the next 30 days — the lowest reading since we started this survey in October 2021. Bitcoin Sentiment Still Weak Last week, just 37% of traders were bullish on Bitcoin. And while that number rose to 44% this week, it’s still pretty low. Apple Sentiment Hits Record Low Market leader Apple (AAPL) is facing a lot of doubters. Just 37% of traders are bullish on the stock for the next 30 days, which is by far the weakest reading in our history. Tesla Is HATED Sentiment towards Tesla (TSLA) also hit a record low, with just 32% of survey respondents expecting the stock to rise in the next 30 days. Gold Bullishness Slipping But Still Elevated Gold sentiment fell slightly week-over-week but it is still elevated relative to most assets in our survey. Oil Sentiment Flattish Oil prices and energy stocks have been ripping in 2022, so it’s no surprise traders remain optimistic on oil, with 69% expecting the price of oil to rise in the next 30 days. The Big Question: Does Negative Sentiment Mean We Are Bottoming Out? While we’ve only been running this survey since October 2021, it’s clear that traders are spooked. Even tried and true market leaders like Apple (AAPL) and Tesla (TSLA) are facing major doubts. And it seems like traders only trust energy, which is no surprise given that crude oil is up 11% year-to-date, with XLE up 24% and OIH up 16%. So the big question now is does the negativity mean we are bottoming out? It’s tough to say — but if you’re looking for guidance in this touch market, you can check out this special Sami Abusaad deal.
Continue Reading -->Derrick Talks to The Simcast
Derrick recently visited the team at The Simcast to talk about his strategies and mentorship style. He also gives listeners an inside look at what it’s like to start at a prop desk, plus how his background prepared him to become a trader. Check out a recording of the conversation below! Derrick and John will discuss: How the COVID-19 pandemic changed his trading career His first foray into trading as a kid What happened when he graduated college in the middle of the 2008/2009 crisis How he transitioned from sales trading to prop trading The trading lessons he’s learned from kickboxing
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