Chart Advisor: Growth Bucks the Trend

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Thursday, 16th February, 2023

1/ ARKK Disregards Rising Rates

2/ Bullish Reversal In AI Stocks

3/ The Right Time to Fade February

4/ Will Steel Futures Catch Higher?

Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.

1/ ARKK Disregards Rising Rates

Late last year, yields were falling as long-duration assets caught a bid, yet growth names failed to participate in the rally. Now, the tables have turned.

The overlay chart of the inverted 10-year U.S. Treasury yield and the ARK Innovation ETF (ARKK) provides a good illustration, with ARKK serving as a useful proxy for growth segments of the market.

Source: All Star Charts, with data provided by Optuma

These two lines track each other closely. Today, however, growth stocks and yields (the inverse of the black line) both rose in tandem. This is the opposite of what we would expect.

A possible explanation is that many of these names have experienced extreme selloffs during the past twelve months. The market could be ready to move on, as many of these heavily-shorted stocks begin to squeeze higher.

The unusual strength from growth areas suggests we could be in the early stages of a new bull market.

2/ Bullish Reversal In AI Stocks

Artificial Intelligence has been a hot topic of discussion since the beginning of the year, increasing investors’ attention to this group of stocks.

The Robotics & Artificial Intelligence ETF (BOTZ) does a great job of illustrating how this niche industry is performing. 

As you can see, after six months of carving out a reversal pattern, price is coiling in a tight range at the upper bounds of this consolidation.

Source: All Star Charts, with data provided by Optuma

The 14-day RSI shows momentum reaching overbought conditions for the first time since November of 2021. This means buyers are becoming increasingly aggressive as they try to take out this critical level of interest.

As participation continues to expand to more technology and high-growth areas, we could add AI and robotics to our list of new uptrends as long as this base breakout remains intact.

3/ The Right Time to Fade February

February is historically one of the weakest months for the S&P 500. However, this seasonal weakness typically occurs in the second half of the month.

Below is the average daily February performance of the S&P 500 since 1950:

Source: All Star Charts, with data provided by Optuma

It should come as no surprise if the overall market sees further selling pressure and corrective action throughout the remainder of the month.

However, if equities manage to get through the next two weeks with the bulls in control, it could suggest that demand is too strong for seasonal headwinds to hold markets back. Whenever trends don’t follow their seasonal patterns, it’s worth paying close attention. In this case, February seasonality could deliver some bullish insights.

4/ Will Steel Futures Catch Higher?

Cyclical stocks outperforming their underlying commodities has been a recurring theme over the trailing six months. 

This has been the case with energy stocks and crude oil, natural gas stocks and futures, and now steel and steel-related equities. Below is an overlay chart of steel manufacturer Nucor Corp. stock (NUE), graphed alongside steel futures:

Source: All Star Charts, with data provided by Optuma

The two began to diverge early last year. However, steel futures are starting to dig in as NUE prints new all-time highs.

Will steel futures catch higher to NUE, or will related stocks experience a steep correction?

This is indicative of a broader development among risk assets, and the next directional move could have far-reaching implications.

Originally posted 16th February , 2023

Disclosure: Investopedia The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy.  While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: ETFs

Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at