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Yesterday (Monday) the market was quite choppy the first two hours before selling off into the close the last 4 1/2 hours of the session. For example, the NASDAQ was flat at 11:30am EST but -2.41% at the close at the days lows.
The S&P was -0.54% while the Russell was +0.49%. The crucial insight into the day comes from the performance of Value Stocks vs Growth Stocks. The S&P Value ETF (IVE) was +1.17% on more than 4x average volume while the S&P Growth ETF (IVW) was -2.12%. Once again, the rotation out of Growth Stocks and into Value Stocks was on full display.
Turning to the technicals, the S&P found support at its 50 DMA while the NASDAQ, QQQ, SMH and AARK all closed well below theirs. The NASDAQ, QQQ and AARK all closed above their intraday lows from Friday which many traders, including myself, will use as their stop levels. The SMH, however, could not hold Friday’s lows and closed below them. The NASDAQ and these three ETFs have significant technical damage to undo if they are to work their way higher.
I called for a powerful bounce soon last Thursday morning, reiterated it Friday morning and announced its arrival Saturday morning in “The Bounce Is Here”. Yesterday I put my money where my mouth is by initiating a 10% trading position in the ETF I most despise in the market (ARKK) to play this bounce. While I lost ~$5/share yesterday, the ETF is currently back up towards my entry point in the premarket as the Futures soar (S&P +1.01% and NASDAQ +2.01% as of 1:25am PST). Perhaps I was a day early.
Lastly, I want to turn to Stitch Fix (SFIX, Market Cap $5.6 Billion) earnings from yesterday afternoon as an example of how investors can’t get out of growth stocks fast enough. The quarter was by no means sterling with Revenue +11.6% and a 20 cent Diluted EPS loss. But the reaction is certainly noteworthy with shares down almost 23% to $53 in the premarket as investors bail from this former growth darling. At $53, SFIX is down 50% from its recent closing high above $106 on 1/27/21.