A quick way to see if a sector is mounting a turnaround is to compare it to the price of the broad market.
For example… here’s a look at ARKK (to represent tech growth stocks that don’t turn a profit) vs. QQQ (to represent crowded mega-cap names).
Full hindsight of course, but demand for high-risk stocks peaked in February 2022…
About 10 months before the rest of the markets got clobbered.
If you zoom in, you can see that a very subtle shift in this relationship has happened:
Since May, some ARKK names have outperformed to mega-cap tech.
This isn’t a guaranteed turnaround yet, but it’s worth considering that high-growth tech has finished deleveraging for the rest of the year.
Let’s take a look at another one — this time XBI (biotech) to SPY (S&P 500):
Back in May, there was no reason to think this relationship would change.
But for about a month, biotech has been on an absolute tear.
Was there a way to get ahead of this?
Check out this chart:
This shows us the insider buy/sell ratio for the healthcare industry.
See those three spikes higher?
They all correlated with major market bottoms in this sector, and we just saw one hit.
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