Splitting the Baby

Cathie Wood's latest price target of $3,000 for TSLA may very well prove to be an inadvertent "splitting the baby" moment for the market. Well, at least for tech and growth. 

As you know, the phase “to split the baby” is an idiomatic expression for what seems like an unreasonable decision but is actually a ploy to flush out the truth. It is a psychological game: Based on people's reactions to his announcement, the decision-maker will be able to gather the right information.

Applied to the current market, TSLA has failed to react jubilantly this week to Ms. Wood's explosive price target, which is noteworthy since she has become the breakout star of the bull run and face of the rally especially since March 2020. Thus, to see the market yawn at TSLA all week is a bit surprising given how ambitious her new target is, and given her gravitas.

Furthermore, Ms. Wood's own ARKK ETF is at risk of a fresh rollover, seen below on the updated daily timeframe. 

Personally, I was a bit surprised at how tepid the bounces have been all week in ARKK, as I expected a bit more relief after the last bout of selling since mid-February. When the bounces fizzled yesterday, I headed to cash. 

As it stands now, if ARKK sustains a fresh leg down it would be fairly masked by the strength in the Dow and market's persistent attempts to rotate. Still, with QQQ down 0.6% as I write this and the small caps in IWM fading off their 50-day moving average (after slicing down through it yesterday), on top of a strong U.S. Dollar, I am respecting the general risk-off tone being disguised at the moment.