It was a bad day for Cathie Wood.
And it was a very strange trading day.
For weeks, stocks have been held hostage to Treasury yields, particularly the 10-year. As yields moved up, stocks, particularly high-multiple megacap stocks, moved down. If yields dropped, tech rallied.
That relationship has broken down.
Yields have been down three days in a row, yet tech did not react.
Megacap tech like Facebook, Amazon, Apple, Micron, and Xilinx were down 1.5% to 3%.
More importantly, the market's favorite high-growth names got clobbered.
Wood's ARK Innovation Fund (ARKK), a bellwether for the big-growth tech crowd, was down 5% and is now 28% off the 52-week high it hit on February 16, which is just when interest rates starting moving up.
Ark Innovation Fund on Wednesday
"You'd think with all this stimulus, money would be pouring into Cathie Wood [funds], and it's just not happening," Josh Brown, CEO of Ritholtz Wealth Management, said on CNBC.
Are retail traders losing interest?
One major surprise has been a pullback in volume. The NYSE volume was 80% of the 30-day average, Nasdaq activity was 90% of the average, unusually low volume given the declines in certain sectors.
"Volume was heavy for Triple Witching last Friday, but Monday, Tuesday and today volumes have been light," Rich Repetto from Piper Sandler told me
Have retail traders, who have been such a large part of the increase in volume last year, suddenly lost interest?
"It seems to show that the retail customer has walked away," Matt Maley from Miller Tabak told me. "The question is, why? Is it higher rates? Concerns about lockdowns? Or are they betting on March Madness?"
Another example: Reddit favorite GameStop was down all day on disappointing earnings but collapsed going into the close, down 33%. But only 23 million shares changed hands, well short of the 30-day average of 34 million shares.
Low volume on a big down day implies not a lot of owners interested in selling, but also not many buyers interested in purchasing, even with shares down over 30%.
Same with another Reddit-crowd favorite: AMC, down 15% on volume two-thirds of its average.
Is Cathie Wood the key?
For the high-beta, high-growth, high-momentum crowd, watching Wood has been an obsession. Maley says the flagship Ark Innovation fund is now set up for a key technical test.
"The closing low for ARK was $110.26 on March 8th," he told me. It bounced nicely off of that, but has been trending down for the last week, Maley noted.
"It closed today at $114. If it drops below that $110 level, that will be very negative on a technical basis," with the trader noting that a "lower low" is usually a negative indicator.
"If buy on weakness doesn't work this time, that is going to worry a lot of people," Maley said.