Intermarket Update

This post continues to reiterate the theme discussed over the past month: strength in growth, weakness in cyclicals. I will also do a separate post soon with a mid-year trading journal review.

Growth stocks

It started with breakouts/ATHs in a few select leading software stocks in May, with dozens more joining the party by mid-June. And now we are seeing breakouts in the broader growth indices.

This recent tech surge has pushed Microsoft’s market cap above $2 trillion last week, and Facebook surpassed $1 trillion this week.

There’s also been some strong movement in the biotech space after Intellia (NTLA) announced Monday the first human treatment of a rare disease using CRISPR gene editing technology. Intellia was co-founded by Jennifer Doudna, who won the 2020 Nobel Prize in chemistry for her work on CRISPR. I’ve been meaning to read the new biography on her, The Code Breaker by Walter Isaacson.

A couple weeks ago, I tweeted this chart of NTLA knowing nothing of the coming news release. I simply liked the beautiful 4-year base breakout it made late last year.

NTLA more than doubled this month.

Intermarket

Bonds & US dollar continue to hold up after their surge earlier this month. Stated another way: bond yields are faltering.

Meanwhile, cyclicals continue to chop.

I showed in a recent post how some major energy stocks (Suncor, Cameco) and commodity currencies (CAD, AUD) were facing major resistance. Here are a few more charts to show the mess in this space:

XAU Weekly. Gold/Silver Miners Index. Failed breakout.

COPX Weekly. Copper had a strong rally after a beautiful 2-year breakout back in Nov. However, COPX is now potentially making a topping formation.

UUUU Weekly. Failed breakout

Bitcoin has been trading with the cyclical ETFs (COPX, SLX, URA). It looks inferior relative to tech stocks:

Summary

Growth sectors are displaying breakouts and strong momentum, while value & cyclicals are at resistance and failing to hold breakouts. The action in bonds and US dollar is consistent with this.

ARKK’s 20-week correlation with VTV (Value ETF) is the lowest it’s been in the 6 years since ARKK’s inception. I continue to believe growth sectors rally throughout the summer while value/commodities chop.


Important DisclaimerThis blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.