I'm Still Short ARKK, and My Bet is Complacency Gets Punished

Using the SARK bearish ETF (via a long position inside Market Chess Subscription Services, just above $51.20 entry) as a proxy to go short ARKK, Cathie Wood's flagship ETF housing a plethora of incredibly rich growth and speculative stocks, I continue to press for ARK to revisit its COVID crash lows in the coming weeks and months. 

While that may sound like an overly-ambitious target, allow me to point out that ARKK failed to reclaim its pre-COVID crash highs from February 2020, as seen on the weekly chart, updated below (upper light blue line). Given the resilience of the broad market of late, still above the February/March lows on the QQQ for example, one would think ARKK should have had a multitude of opportunities by now to sustain breathtaking relief rallies at a minimum, if not roaring off a bear market low as many have suggested. 

But that has not happened, as the latest bounce attempt above $60 failed miserably. 

My working thesis now for growth and most tech stocks (excluding the rare value gem like IBM) is that we are off the prior lows in most spots (see QQQ) but we have not put in a major bottom. Hence, the lack of bonafide fear out there amounts to recklessness, where market players ought to know the risks facing growth names but are disregarding them instead. 

There are also a bunch of arguments floating around today about the resilience of the market, low volatility, and rotation all pointing to the market having already bottomed earlier this year and how we are on the cusp of a major rally. My counter to those points is, of course, value and commodity plays can keep outperforming. But to give tech/growth a pass from here on out is likely a mistake. The spring of 2008 also featured low volatility and rotation, not to mention index resilience. 

And since some of you are probably rolling your eyes by now with the 2008 analogies, the summer of 2011 before a sharp swoon and various points in the 2000-2002 bear also featured moments of apparent rotation and low vol...before a sharp drop.

The bottom line is this: The Nasdaq Composite Index is below a declining 200-day moving average as growth stocks struggle to hold even modest relief rallies. To be an emboldened bull against that backdrop is to take a leap of faith that historically is not a very good bet in the intermediate-term, especially with a tightening Fed and likely disappointing earnings coming up from the rich growth names. 

ARKK is arguably the poster child for all of this, which means I continue to take shots at it dropping much lower than even bears expect.