Stock Market News – The One Great Certainty of the Market Is Cycles
It is always remarkable how the cycles of the market can shift. Many stocks have been wrestling with a stealth bear market that started around mid-February. Most of the folks in the business media never even mentioned this action. There were primarily focused on the DJIA, which was being driven steadily higher each day by financials and slow-growth ‘value’ names.
There was some acknowledgment of the destruction that was taking place in the ARK Innovation ETF (ARKK) and many of the high-multiple, high beta growth names, but the view was that they had become grossly overvalued, and therefore it shouldn’t be a big surprise that they were pounded down 30%, 40%, 50% or more.
Groups like biotechnology, SPACs, EVs, solar energy, gambling, cannabis, and several others, went bidless and were dumped without any regard to their individual merits.
Finally, in the last couple of weeks, this rotation out of growth and speculative names and into value started to reverse. It took some corrective action in the DJIA and S&P 500 to trigger it out, but now we are moving back to where we were early in the year. Traders are focusing on stock picking again, and many of the speculative stocks are being rediscovered as they turn up off their recent lows.
ARKK has already bounced more than 12% off its recent lows but remains under its 200-day simple moving average and is still down 30% from its February highs.
We will see how this continues to develop, but, as I’ve written many times, the one great certainty of the market is cycles. Every cycle is different in certain ways, but if we can recognize them as they develop, it makes our jobs as traders much easier.
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