Last week the Fed Chairman Powell said that the economic reopening could cause inflation to pick up temporarily. He pledged not to raise interest rates even with the uptick of inflation. The stock market took it as an excuse and crashed the NASDAQ to down more than 10% from the 52-week high on Thursday. It made a lower low on Friday, but it managed an intraday reversal to close above 12835. Closing above 12835 could prevent the NASDAQ to test the support below at 10725-10825. We have to wait and see how it does on Monday. Over the weekend, the Senate passed the $1.9 trillion stimulus bill. The President will sign the bill pretty soon and the checks will go out in March. The passage of the $1.9 trillion stimulus bill probably would stop the stock market from going further down. Seasonally, mid-March is an ideal location for a low.
The energy and financials have been the out-performers and the growth stocks got hammered this year. We see this is a good sign. The bull market is broadening and inclusive, not like the DOTCOM bubble that only included the telecom stocks on its way to DOTCOM bubble top. This dip is a gift for the growth stocks. The rising rates will not stop the bull market. The normalized 10-year note yield should be around 3-5%. It is only around 1.5% now. It has a long way for the 10-year treasury to go from 1.5% to 3%. A massive amount of money has to come out of bonds to drive the interest rates higher.
PLTR made a crash low at 20.18. We haven’t taken out our original position that we bought around the IPO price. We added more during this crash. This stock has all the elements to be a super tech company in the next 5-10 years. It is a high quality company that will be leading the coming tech boom. We still believe the innovation ETF ARKK and ARKG will continue to out perform the value stocks. If you are looking for a long term investment with a 5-year horizon, you should buy ARKK or ARKG instead of the index. We believe ARK Investment is an excellent fund manager that’s ahead of the curve.
Below is the NASDAQ daily chart. It has been 13 trading days from the 52-week high. It is due for a bounce for the daily cycle. Let’s see what it does on Monday.