The family of ARK funds have received quite a bit of attention lately. In particular, the ARK Innovation ETF (ARKK) managed by phenom Cathie Wood, has been in the news for months. The fund is in what she calls the "disruptive innovation" companies. Their top ten holdings are below:
Given the Technology sector has been taking it on the chin, it doesn't surprise us that ARKK has been beaten up too. Unfortunately, the holdings above have not been performing well. According to the article today on CNBC, $290 million dollars left the fund last week.
I actually presented ARKK to my Diamond subscribers back on August 19th 2020 (Diamonds subscribers can click here to view the report). The stop was never hit. Currently the position is up +29.5% since, but at the top, the position was up over 83%. Price is now testing the 200-EMA and the bottom of the current trading channel. Normally we would look at this as an entry to take advantage of the decline to this important area of support; however, the indicators are particularly ugly. The RSI is negative and not oversold yet, the PMO triggered a crossover SELL signal today well-beneath the zero line. It began underperforming the market on the big decline and continues to underperform.
Given the very negative indicators, this is a high risk play despite price sitting on a support level that it previously rallied from. Consider this as well, she is adding more money to some of these positions in all of her funds. With the market beginning to top, I don't like it.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MAJOR MARKET INDEXES
Each S&P 500 Index component stock is assigned to one, and only one, of 11 major sectors. This is a snapshot of the Intermediate-Term (Silver Cross) and Long-Term (Golden Cross) Trend Model signal status for those sectors.
CLICK HERE for Carl's annotated Sector charts.
THE MARKET (S&P 500)
IT Trend Model: BUY as of 5/8/2020
LT Trend Model: BUY as of 6/8/2020
SPY Daily Chart: Yesterday saw a new PMO SELL signal and today price reacted as we would expect. The 20-EMA was penetrated today, but price managed to right itself and end near the top of today's trading range. It still dropped -0.62% today. It is a "hammer" like candlestick, but this doesn't seem like a reversal point. Notice the spike in the VIX and high volume on both the SPY itself and the SPX Total Volume.
The RSI is still in positive territory, but it is declining.
Participation: The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA).
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA).
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
The GCI was unchanged Friday and today. You can see that today's decline did move the SCI below its signal line in overbought territory. The BPI had a near vertical drop below its signal line.
Price participation is waning as more stocks lose support at their 20/50-EMAs. We can also see that the %Stocks > 200-EMA is finally beginning to trend lower.
Climax Analysis: There were a few surprises here for me. The amount of New Highs was impressive for a difficult trading day. The other big surprise was that we didn't see even remotely climactic readings on Net A-D and Net A-D Volume. The VIX not surprisingly popped lower and beneath the Bollinger Band on the inverted scale. This is an oversold condition typically, but as I continue to reprint the message below, I wouldn't bank on it. Instead look for the Bands to begin expanding as the market continues lower.
Keep in mind: When the Bands squeeze it makes any penetration of the Bollinger Bands less useful since it is easy for them to punch through the upper Band one day and immediately puncture the bottom of the Band the next.
A Bollinger Band squeeze also signals that volatility is ahead. The Bands can't remain squeezed together forever and the only way to have them expand is on high volatility. I've never seen a VIX squeeze finish with a powerful thrust to the upside. High volatility is almost always bad.
Short-Term Market Indicators: The short-term market trend is DOWN and the condition is NEUTRAL.
The STOs are continuing lower, suggesting we will see a continuation of today's decline. The STO-V hit negative territory and isn't oversold. When red begins to show up on these indicators it tells us the bullish bias is disintegrating. I was surprised that we didn't see more damage to %PMOs Rising, but tomorrow could be another story.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERBOUGHT. The market bias is BULLISH.
The ITBM/ITVM continue to contract. We didn't see much damage to the %Stocks with PMO BUY signals.
CONCLUSION: Despite the high volume selling that occurred today, we didn't see that much damage to the PMOs amongst the stocks in the SPX. However, consider this: The readings are both 47% and that cannot ignite a rally. We need to see more participation overall. The VIX spike usually suggests a rally pop in the next day or two. It could happen, but the rest of our indicators are flashing bearish. A big concern is the ebbing of the short-term bullish bias. Today's decline is likely to expand into a pullback or possible correction.
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Well so much for the bullish reverse head and shoulders. Bitcoin dropped like a rock. This erased its PMO BUY signal and positive RSI. Meanwhile Ethereum and Dogecoin are enjoying sizable rallies likely because Bitcoin is simply priced too high.
Long-term rates had begun to break their declining trends. We're seeing them pullback again, but we don't think this will continue much longer.
IT Trend Model: SELL as of 4/26/2021
LT Trend Model: SELL as of 7/10/2020
UUP Daily Chart: The Dollar rallied and hit overhead resistance. The PMO is still flat and the RSI is negative.
While we could see UUP rise a bit more to test the 50-EMA and February top, I expect it to fail. $24.40 will likely be tested again soon.
IT Trend Model: BUY as of 5/3/2021
LT Trend Model: SELL as of 3/4/2021
GLD Daily Chart: Oh Gold, you fickle fiend. Given the Dollar surged, we expected Gold to decline; however, it dropped further than the Dollar fell. On the bright side, it held comfortably above the 20/50-EMAs and the RSI is still positive. The 200-EMA is holding strong. The PMO has flattened.
Yesterday I wrote, "Gold has failed here before and the spike in the PHYS Discount does tell us that participants are bearish. Usually this is a good thing since sentiment is contrarian, but as you can see these discounts are not dramatically high." I believe Gold will push past the 200-EMA, it's just being cranky as usual.
GOLD MINERS Golden and Silver Cross Indexes: Miners pulled back today, but are holding onto support. The PMO is on a SELL signal, but I'm still bullish here. Despite a more than 1% decline, there was very little damage done to the internals.
CRUDE OIL (USO)
IT Trend Model: BUY as of 11/23/2020
LT Trend Model: BUY as of 3/9/2021
USO Daily Chart: Finally saw a breakout on USO. It's teeny tiny, but given it happened on a 2%+ rally, I consider it very bullish. The RSI is positive and the PMO is rising on a BUY signal.
Yesterday I wrote "expect a breakout soon". We got it, time to go fishing in industry groups related to Crude Oil.
IT Trend Model: NEUTRAL as of 8/27/2020
LT Trend Model: SELL as of 1/8/2021
TLT Daily Chart: The PMO bottomed above its signal line today which is especially bullish. The RSI has now entered positive territory. Yields started falling last week and that has pushed TLT up to its 50-EMA.
Yields aren't likely to move much lower so we aren't looking for a breakout here. Remember when the 50-EMA is that far below the 200-EMA, the stock or ETF has a strong bearish bias so you should expect bearish outcomes rather than bullish ones.
Technical Analysis is a windsock, not a crystal ball.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically, the DecisionPoint Trend Model. They define the implied bias of the price index based upon moving average relationships, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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