Here’s a look at $ARKK relative to the S&P 500. It’s important to be in outperformers, and also to know that the strongest stock will ultimately get worn out. (December 03, 2021)
ARKK
I want to look at ARK ( NYSEARCA: ARKK ). If you will just notice the date here, we’re clear back into 2020. I could go further if I wanted to but I don’t want to.
Here’s the thing, this is ARK ( NYSEARCA: ARKK ) relative to the S&P 500 ( NYSEARCA: SPY ), they all start at the same place so you can see, in 2019 ARK ( NYSEARCA: ARKK ) wasn’t doing that well relative to the S&P ( INYSEARCA: SPY ) until it really started to take off here. This is the point of this video, you can tell when a really, really hot stock or, in this case, an ETF. As we look here, you know what ARK ( NYSEARCA: ARKK ) did. Last year it was an absolute monster move, that was an amazing move. A lot of people made a lot of money, I, sadly, was not one of them.
We see this thing going and watch how it just continues to outperform. Now, the S&P ( INYSEARCA: SPY ) is doing well but ARK ( NYSEARCA: ARKK ) is just absolutely crushing it, barely tagging the 10-day moving average. And so here we are, still going, still going, a trend break there but still going. Meanwhile, the S&P ( INYSEARCA: SPY ) is kind of drifting around. You will notice the S&P ( INYSEARCA: SPY ) has been trading sideways, ARK ( NYSEARCA: ARKK ) is still, essentially, moving higher but not at the speed that it once was.
So you are looking here and you see, here we have a channel. And so this keeps going up, now we are close to 2021 and this is just absolutely bubble vision here. Just absolutely popping, not popping but it’s moving. New highs and the S&P ( INYSEARCA: SPY ) is just kind of floundering around. And then now we are into 2021 and just watch what happens. Now the S&P ( INYSEARCA: SPY ) continues up in a relatively undramatic way, while ARK ( NYSEARCA: ARKK ) has really fallen badly and then it just continues to fall, and so here we are.
So my point for raising this issue is actually pretty simple. It is really important to know if the stocks that you are in are outperforming the market. It is not going to be an everyday thing, not at all. But you want to have stocks in positions that have a high relative strength because if they are underperforming, the S&P ( INYSEARCA: SPY ) or the Nasdaq ( INDEXNASDAQ: NDX ) or whatever benchmark you want. If they are underperforming then you would actually be better off having your money in the S&P 500 ( INYSEARCA: SPY ), or in the Nasdaq 100 ( INDEXNASDAQ: NDX ) rather than the stock that it’s in that is not doing as well.
And by the way, think about it this way too, if the Nasdaq ( INDEXNASDAQ: NDX ) or the S&P ( INYSEARCA: SPY ) are outperforming the stock that you are in, but the Nasdaq ( INDEXNASDAQ: NDX ) and the S&P ( INYSEARCA: SPY ) are moving lower, you know, you’re not making any money that way, then you have to flip around your logic and say, well, wait a minute, I’m in the position that is losing me the least amount of money. If I was in this other stock, whether it’s ARK ( NYSEARCA: ARKK ) or any other stock, if I was in that stock I would be losing a lot of money. Well, I am only in the S&P ( INYSEARCA: SPY ) now or the Nasdaq ( INDEXNASDAQ: NDX ), and so I am losing less money, Hey, that’s a good trade. No, it’s not. If you are in that situation then you just say, maybe I will just be in cash.
If you run through that simple analysis, that simple thought process, you will find yourself out of stocks that later you would otherwise look back at and say, why did I hold that stock? I held it too long. What was I thinking? I lost my focus, etcetera, etcetera. So just look and see, make sure all of your stocks are outperforming the S&P ( INYSEARCA: SPY ) or whatever benchmark you have. And if you can say that about all of your stocks you are literally going to have no way to fail, you just won’t. You will succeed by default, almost by accident.
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