Tech Bounces Hard, Cathie Baby, Dead Cat Bounce Or End Of The Correction?, ORCL Earnings Preview

It was bound to happen: After months of underperformance versus Value, Growth (which is mostly tech) bounced hard yesterday (Tuesday). In a reversal of the recent trend, the S&P Growth ETF (IVW) was +3.08% while the S&P Value ETF (IWE) was -0.26%.

The Nasdaq led the major indexes up 3.68% – the S&P was +1.42% and the Russell +1.91%.

Despite the massive move in tech, the dominance of Value over Growth is likely only just beginning. JC Parets of All Star Charts did an excellent blog post yesterday on just this issue writing: “This still looks like a major top in Growth relative to Value” (“Add To Growth? Or Dump It?”, JC Parets, All Star Charts, March 9).

The star of the day was Cathie Wood’s Ark Investment Research whose flagship ARK Innovation ETF (ARKK) had one of it’s best days ever, up 10.42% on 2.5x average three month volume. Obviously, I was very happy as I am playing the bounce via a 10% position in ARKK. The rest of Ark’s ETFs had excellent days as well.

 

 

The question now arises if Friday’s low was the correction low or this is now a dead cat bounce in a bear market. Only the market will tell us in the days and weeks ahead but a survey of the technical landscape shows that – despite yesterday’s powerful moves – a lot of technical damage remains to be undone for this market to start looking healthy again.

The S&P, with its heavier value component, is doing just fine and closed back above its 50 DMA but the best performing growth areas of the market (Nasdaq, QQQ, SMH and ARKK) are still well below their 50 DMAs.

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