All posts by T3 Live
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 -->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 -->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 -->Traders Turn on Bitcoin
What’s the big takeaway in this week’s sentiment survey? Traders have turned in Bitcoin! So let’s jump in and see what’s going on. SPX Bulls Keep Backing Off January tends to be a good month for stocks, but traders have become much much less bullish over the past two weeks, thanks to the selloff. Bitcoin Sentiment Collapses Just 37% of traders are bullish on Bitcoin — the lowest level we have ever seen since we launched this survey in mid-October. Given how hard Bitcoin has been dropping, this is no surprise – though this week-over-week drop is staggering. Apple Bears Come Out to Play Apple (AAPL) has been caught up in the growth stock meltdown, and bullishness fell for the second week in a row. Tesla Bulls Disappear Tesla (TSLA) bullishness dropped big from last week as a result of the growth stock meltdown. Gold Bullishness Slips Gold sentiment tends to be all over the place from week to week. And this week, there was a slight drop from 72% to 66%. Oil Sentiment Flattish Oil prices have been on the rise since early December, and that’s certainly had a big impact on oil sentiment.
Continue Reading -->$3 Trillion Market Cap for Apple – Do Traders Care?
What’s the big takeaway in this week’s sentiment survey? Traders are a little less excited about Apple (AAPL)… right when the company reached the $3 trillion market cap. SPX Bulls Back Off January tends to be a good month for stocks, but bullish sentiment backed off a bit from last week. Bitcoin Sentiment Edges Lower Bitcoin continues to trend lower after the September to November explosion, so it’s no surprise to see sentiment edging down. Apple Bulls Settle Down Apple (AAPL) sentiment was also down from last week, though that’s too bad. the stock is ripping to kick of 2021, becoming the first company to hit a $3 trillion market cap. Tesla Still Liked Tesla (TSLA) sentiment is basically flat with last week, and that’s good – the stock is screaming higher after the company reported strong Q4 shipment numbers. Gold Bullishness Jumps Gold sentiment tends to be all over the place from week to week. And this week, there was a big jump from 56% to 72%. Oil Sentiment Flattish Oil prices have rallied well off the December lows, but traders are not particularly excited about oil.
Continue Reading -->What Is the Best Month for Stocks?
What Is the Best Month for Stocks?April is the best month of the year for the stock market, based on S&P 500 data since 1980. The S&P 500 rises 2.0% in April on average, higher than any month. The S&P 500 has also been up in 31 of the 42 last Aprils, or 74% of the time. That is the highest percentage of all months. Wilshire 5000 data also supports this notion. S&P 500 Returns By Month Since 1980 Month of the YearAverage SPX Return % Positive MonthsJanuary 1.0% 60% February 0.2% 62% March 0.8% 62% April 2.0% 74% May 0.9% 69% June 0.3% 62% July 1.0% 52% August 0.2% 60% September -0.7% 48% October 1.2% 64% November 1.8% 71% December 1.3% 73% Data Source: Investing.com April also has another unique distinction – the smallest maximum loss. In April 2002, the S&P 500 fell -6.1%, so the worst April was better than the worst of all other months. And What Is the Worst Month for Stocks?September is the worst month for stocks, with a -0.7% average decline since 1980. That makes September the only month of the year that is negative on average. The S&P 500 has risen in just 20 of the last 42 Septembers, so it was up only 48% of the time. Again, that is the worst performance among all months.Those are the simple answers. Now let’s complicate things.The Challenge With Monthly Return DataAnalyzing monthly stock market returns may seem like a simple Excel exercise. However, it is fraught with challenges, like deciding how far to go back, especially since index composition changes so much over time. There’s also the question of whether this data is even valuable. A monthly return is simply the percentage change between one month’s closing price and the next. Are you making buys and sells exactly on the close of each month, with no activity in between?There are plenty of other more important factors affecting your returns, including:Whether you are long or shortYour mix of asset classes like stocks, bonds, crypto currencies, and other assetsThe individual stocks, ETFs, and cryptos you ownThe overall market environmentYour holding timeWhen you choose to buy or sellTaxes and trading commissionsNonetheless, let’s take a deep dive and see what we can learn from average monthly stock market return data.The Best and Worst Months for the Nasdaq Composite, Wilshire 5000, and Russell 2000.The biggest problem when asking “what is the best month for stocks?” is that you need to ask a second question: “which stocks are you talking about?”So to determine whether April is really the best month for stocks, we looked at three other major indices: the Wilshire 5000, Nasdaq Composite, and Russell 2000.Next, let’s look at the Wilshire 5000, the broadest index of US companies.The Wilshire’s, best month is April with an average return of +1.9%, and it’s worst month is September.The Nasdaq’s the best month is actually January with an average +2.3% return, though the worst month is September, just like the S&P and Wilshire.For the Russell 2000, the best month is December, with an average return of +2.6%. And the worst is August with an average return of -0.3%.You can see all the numbers in this table. The best months are outlined in green with the worst months in red. Average Monthly Returns By Index Month of the YearSPX Wilshire 5000 Nasdaq Composite Russell 2000January 1.0% 1.2% 2.3% 0.7% February 0.2% 0.4% 0.6% 1.2% March 0.8% 0.6% 0.4% 0.8% April 2.0% 1.9% 1.9% 1.7% May 0.9% 1.0% 1.4% 1.2% June 0.3% 0.4% 1.0% 0.7% July 1.0% 0.8% 0.7% -0.2% August 0.2% 0.3% 0.6% -0.3% September -0.7% -0.7% -0.6% -0.1% October 1.2% 1.0% 1.2% 0.2% November 1.8% 1.8% 2.2% 2.1% December 1.3% 1.4% 1.6% 2.6% Data Sources: Investing.com, Yahoo Finance! Please Note: our Russell 2000 data only goes back to 1988, while our S&P 500, Wilshire 5000, and Nasdaq numbers go back to 1980. Still, we believe this is more than enough data to support the idea that April is the best month for stocks. Is November the Best Month for Stocks?Many investors argue that November is the best month for stocks. But the Wilshire 5000 is the broadest measure of the US market, and it points to April as being the strongest month. But arguing over “best” may be silly because the data suggests that different types of stocks do better at different times of year. And we’re not talking about huge differences anyway.Why Not Focus on the Median?If we go by median monthly returns, November actually becomes the best month for stocks. But average returns make more sense because investing returns are heavily impacted by statistical outliers, which would be excluded when using the median.Now let’s go through some of the more interesting individual findings.October Stock Market Returns – The Weird Thing We NoticedThe S&P 500 was positive in 27 of the last 42 Octobers, with an average return of +1.6%.The two worst months for the S&P 500 since 1980 were:-21.8% in October 1987, when we had the Black Monday crash-16.9% in October 2008 during the housing meltdownExcluding these months, the S&P 500 has been up on average of 2.2% each October. So outside of generational disasters, October is generally an outstanding month. S&P 500 October Returns Since 1980 All OctobersOctobers Minus the 2 Outliers+1.6% +2.2% Data Source: Investing.com And that brings us to another point regarding monthly returns. There is a great deal of chance involved, and one or two generational outliers can dramatically impact the numbers. Does One Month Mean Anything for the Next?The stock market on average returns +0.84% per month.After an up month, the market returns an average of +0.86%.And after a down month, the market is up an average of +0.82%.So one month doesn’t seem to mean much for the next, with one exception that we found:What About the January Effect?December may have a small impact on January.After positive Decembers in the S&P 500, January has been up 74% of the time with an average return of +1.2%.That’s a slight increase from the overall January average
Continue Reading -->Do Traders Believe in Miracles? YES!
What’s the big takeaway in this week’s sentiment survey? Traders are more bullish pretty much across the board. In this week’s survey, bullishness grew on all of the assets we track aside from gold. Now let’s dig in: SPX Bullishness Shoots Higher Last week, there were worries the Santa Claus rally would not come through, thanks to the rise of the Omicron Covid-19 variant. But, bullish sentiment skyrocketed to 76% this week after the S&P 500 rose Tuesday through Thursday of last week. Bitcoin Sentiment Up Bitcoin bullishness was hovering around the 55% mark for weeks but is up to 67% this week. Apple iLove Is Back Last week, just 49% of traders were bullish on Apple (AAPL), an all-time low in our survey. However, with Apple shooting up through the end of last week, bullishness jumped to 74%. People Like Tesla Again Tesla (TSLA) was down in the dumps thanks to Elon Musk’s stock sales… but it appears the stock’s rebound is pleasing traders, with bullishness rising to 75% this week. Gold Bullishness Drops Once again, traders failed to stay attracted to gold, with bullishness dropping to 56% this week from a record high of 78% last week. Oil Bullishness Slips Oil prices were up last week, which boosted oil bullishness modestly over last week.Save 25% With Our Customer Appreciation SaleReady to make more money trading WHILE saving big money on our services? Click here to learn how!
Continue Reading -->Traders Love Gold
The big takeaway in this week’s sentiment survey? Traders love gold! SPX Bullishness Falls Given the emergence of the Omicron variant, it’s no surprise that SPX sentiment fell this week. 58% of traders believe the SPX will rise over the next 30 days, down from 67% last week. Bitcoin Sentiment Remarkably Steady This is the most unusual thing we’ve seen since we launched T3 Sentiment. Bitcoin sentiment has been pretty much dead flat for 3 straight weeks at around 55%. Apple Doubters Just 49% of traders are bullish on Apple (AAPL), the lowest reading since we launched the Sentiment Survey. Traders Doubt Tesla 51% of traders are bullish on Tesla (TSLA), down slightly from last week. It appears that Elon Musk’s controversial Tweets are not helping the stock… Gold Bullishness Skyrockets A whopping 78% of traders are bullish on Gold for the next 30 days, up from just 55% last week. Why? Because of the combination of Omicron fears and rising inflation. Oil Bullishness Slips With oil prices continuing to fall, it’s no surprise that bullishness on oil fell:Save 25% With Our Customer Appreciation SaleClick here to learn more!
Continue Reading -->Apple Bears Were Wrong
Traders came in slightly cautious last week… and it turns out they were wrong. Because the broader markets, led by Apple (AAPL), hit a string of record highs. SPX Bullishness Bounces Back Last week, just 56% of traders were bullish – the lowest reading we’ve had since launching the survey in October. With the market rebounding, bullish sentiment pushed up to 67%. Bitcoin Sentiment Steady Traders remain ambivalent towards Bitcoin, with bullish sentiment at 55% for the second straight week. And as you might expect, the downtrend has traders more wary of Bitcoin. Apple Doubters Proven Wrong Last week, just 53% of traders were bullish on Apple (AAPL)… but the stock proved the crowd was too pessimistic as it hit a string of all-time highs. Bullish sentiment rose to 63% for this week. Tesla Bears Back Off Last week, just 36% of traders were bullish on Tesla (TSLA). This week, that number is up to 54%. Unfortunately, Tesla is selling off today. Gold Flat Gold sentiment is essentially unchanged from last week, with 55% of traders identifying as bullish. Oil Bullishness on the Rise Bullish oil sentiment rose for the third straight week to 64%, even with crude oil slipping.Save BIG With Our Customer Appreciation SaleClick here to learn more!
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