The first to correct was the ARKK style companies in February 2021. Then the FAANG/QQQ style stocks in November 2021. Are Energy and commodities next as we head into a recession? Probably. Depends on when the Fed backs off the Rate hike cycle.
One might start nibbling on the ARKK and QQQ styles companies. Growth will likely be the first to react once treasury yields come down. If trading the ETF’s, start tracking them technically for an initial entry point with a third of what you will commit. Then add as the basing pattern continues to develop. Try to ride the wave upwards as long as it lasts. No different the ocean surfing. Just a different medium. Stalk the wave. Catch the wave. Ride the wave.
LOTM likes the FINTECH payment companies because they have 15 to 25% (some higher) growth in revenue and cash flows. Valuations are attractive. They could go lower but some are down 80% to 90% from their highs now. StoneCo (STNE)* is $9.45 down from $95 as example. You can start getting excited because from the market lows will come your next big winners.
- Are you happy with 15% to 20% returns or are you “hunting” 2X to 5X returns. Both are there, but personalities and financial circumstances determine your tolerance for volatility. Decide what your goal is and there is a plan for you. Balance is Key.
Solid line below, is the NASDAQ 100. The candlestick pattern is the Ten-year Treasury bond “Yield.”
We are seeing what “might be” a double top on the Ten-year bond interest rates. That would be bullish for the NASDAQ 100.
- If or when bond yield comes down, we are likely to see growth stocks explode upwards. Decide your plan of attack now so you are not reactive and late to the trade. Text for appointment if you want to talk it through.
ARKK / QQQ & SPY all in one chart with market Volume
The ARK ETF type growth topped in Feb 2021. Note the volume in the chart and the relationships to market lows. We could be approaching market lows when volume is considered. FAANG (QQQ) type stocks topped in November 2021. Commodities are likely to correct latter in 2022 if / when we move into a recession and interest rates decline.
ARKK/Ten-Year Treasury ratio with MAs (Moving Averages)
QQQ/ Ten-Year Treasury Ratio with MAs
I am going to repeat what is implied above. Do not watch what the Fed does with interest rates. The market yields on two, five, ten and thirty-year treasuries will tell you best what the market is thinking. Working with the ratios of different market ETFs and treasury yields, can be a better signal than watching the price of ETFs by themselves. We (the market) are extended and over-sold now. While anything can happen, we think it is a good time to begin initiating positions in some growth stocks. StoneCo (STNE)* – PagSeguro (PAGS)* and Bakkt (BKKT)* are three of our favorites. We are looking for doubles and triples from these companies rather than 15 to 25% moves. Our time-line is 18 to 24 months or sooner. Yes, LOTM still likes metal miners going forward.
Good Luck! Happy hunting.
Text 651 245 6609 or email Money @ LivingOffTheMarket to set an appointment to review your strategy.
LOTM Research & Consulting Service
* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
Please refer to our web site for full disclosure at www.LivingOffTheMarket.com ZTA Capital Group, Inc.
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