The major averages were lower this week, but it was still a win for the bulls.
Here’s why…
Since the market bottomed over two months ago, the best stocks have been the riskiest ones.
Of course, I’m talking about the impressive leadership from speculative growth.
We’ve seen this story before, though. We’ve actually already seen it several times in the current cycle.
Speculative tech was an area of standout leadership during the Q4 2023 rally.
The space also outperformed in a major way during the post-election ramp-up coming into the year.
But the momentum and relative strength didn’t last in either of those cases…
I think this time is different…
And the relative trend between the flagship ARK fund and the S&P is a big reason why:
This is the same special pattern we’ve been leaning into for years now. The rounding bottom reversal.
It is a prolonged accumulation phase whereby price goes through a period of sideways action while the trend gradually transitions from down to up.
The completion of this formation signals a valid trend reversal and tells us the path of least resistance is now higher.
In the case of ARKK/SPY shown above, a resolution would suggest more outperformance from speculative growth stocks over longer timeframes.
The last time ARK broke out of an accumulation phase on relative terms was early 2020. Before that, it was early 2017.
If you remember those years, you know they were some of the best times for bulls in recent history.
The 2017 and 2020-21 bull markets were characterized by low volatility and risk-on price action.
The animal spirits were running wild.
The riskiest stocks were the best-performers, and Cathie Wood was on top of the world.
I think the second half of 2025 is going to be a lot like those periods before it.
One way we’ll know is that this reversal pattern in ARKK/SPY will be a valid one.
This chart will keep climbing up the right-hand side of the screen, and speculative growth stocks will continue to lead.
This week was a good start with the flagship ARK fund going out at fresh cycle highs on both absolute and relative terms.
We’re also seeing a bit of a momentum thrust in the ratio, which I always love to see at a key level like this.
Another thing that has me feeling this breakout in speculative growth is the feedback I’ve been getting from the market.
We keep buying these ARK-y names, and we keep being rewarded for it. AST SpaceMobile has been a monster for us the past two weeks. We sold a quick double, and the remaining calls are running wild as the stock is breaking out of a massive coil. Our calls were up about 18x at the close today.
Long story short, we’re going to keep looking for these speculative tech runners… and we’re going to keep buying calls to juice our returns. Join us risk-free and get the next trade!
