The uncertainty around a Russian invasion of Ukraine combined with a three day weekend created a tough spot for traders. If Russia does indeed invade Ukraine, I suspect the market will tank when it reopens on Tuesday. If Russia does not invade, however, I believe the market is potentially positioned for a powerful bounce.
While I’m no geopolitical expert my hunch is that Putin missed his window because the element of surprise has been lost. At this point all eyes are on him and if he does move the reaction is likely to be swift and forceful – and I’m guessing he knows this. The President of the United States – who has slightly better intelligence than Top Gun – has taken the opposite position so I could be completely wrong.
Nevertheless, based on this line of reasoning I covered my short position in Cathie Wood’s Ark Innovation ETF (ARKK) and took a small long position in it. In addition to my hunch that there will be no war, many of Cathie’s holdings are badly oversold and look due for a bounce. Just this week Shopify (SHOP), Palantir (PLTR), Roku (ROKU) and DraftKings (DKNG) all got smashed post earnings. Take a look at the slope of those charts! Each of those four stocks are among ARKK’s top 20 holdings.
While World Famous Nature Boy – who all women want to be with and all traders want to be like – is likely correct that this is not THE bottom, it may very well be A bottom. There will be many short and intermediate term bottoms and countertrend rallies during what I believe will be a nasty, long, drawn out bear market. And while you don’t want to mistake them for THE bottom, bear market rallies are ferocious and you can make good money trading them. Not all bottoms are equal!