Market Review:
The tape this week was horrendous and should now seriously call into question the “new bull-market” narrative.
My main concern regarding this narrative was the tremendous amount of overhead resistance facing most growth stocks.
Because most new traders disregard long-term charts, this overhead resistance may not have been clear, but when you zoom-out to the monthly chart, we can see the massive barrier facing ARKK:
The above chart shows the bulls venturing into the overhead resistance zone, but that foray was quickly rebuffed.
Notice this has been very different from the rally of 2020 due to the fact that there was no overhead resistance back then and there’s a tonne of resistance now.
This next chart is a little bit different. It’s still the same ETF (ARKK) but everything has been stripped away except for the 100 & 150 day moving averages.
With this unique perspective, starting on the left-hand side, we can see that a new bull market started in ARRK when the green 100dma crossed above the red 150dma:
From there, ARKK rallied, endured the COVID crash, and rallied robustly again with the green decisively above the red. Now that was a real bull-market.
Fast forwarding to today, we can see this year that the green just barely crossed over the red indicating - at best - a weak bull-market.
This so-called bull market didn’t last long, however, and is over as of now, with the green slipping back below the red.
The key lesson is that successful trading has nothing to do with buying at the lowest price. I sometimes hear people say something along the lines that buying stocks is like buying a washing machine - the lower the price the better. Wrong!
Even if a trader got lucky and bought ARKK near the lows 18 months ago, he still hasn’t made money, since it’s just been grinding sideways ever since then.
To reinforce what I’m trying to say, here’s a critically important quote:
It isn't as important to buy as cheap as possible as it is to buy at the right time.
-Jesse Livermore