Founder’s Note: One of the great things – maybe the best thing, it’s hard to keep track – about Sam Gatlin is that he pays attention.
He follows the data. He listens. He learns a lot, and fast.
Here he is again to share some more applied knowledge… – JC
By Sam Gatlin
There’s something deeply uncomfortable about buying boring things.
And there’s something deeply intoxicating about owning what just doubled.
That tension, between excitement and discipline, is where most investors get themselves into trouble.
Let’s start with the poster child for excitement: the ARK Investment Management flagship fund, the ARK Innovation ETF (ARKK):
ARKK isn’t perfect, but it does a pretty damn good job capturing the behavior of the high-beta, narrative-driven, “this changes the world” trade.
From the April lows last year, ARKK went from $38.57 to $92.65.
That’s a 140% rally.
In less than a year.
That kind of move conditions people. It trains them. It tells them that buying the dip works. That volatility is your friend. That you just have to be brave enough to hold on.
Until it doesn’t.
Right now, ARKK is resolving lower from a prolonged distribution pattern.
The sweet rally off the lows has morphed into something very different.
It looks like the early stages of a brand-new primary downtrend.
And if you’ve been doing this long enough, you know how this story usually ends.
The hottest growth stocks do amazingly well during good times.
They’re unstoppable. They’re revolutionary. They’re the future.
Then the cycle turns.
And they crater.
Not 5%. Not 10%. They get cut in half, or more.
While people are busy bag-holding what used to work, money is flowing elsewhere.
And right now, it’s rotating into the exact areas that make people uncomfortable.
Like consumer staples.
The Consumer Staples ETF (XLP) has been screaming higher in 2026, pushing to new all-time highs:
This comes after short interest reached the highest level since 2014.
Positioning was wildly offside.
Nobody wanted soap and toothpaste stocks when AI stocks were doubling.
Nobody wanted cereal and soda when speculative growth was ripping 140%.
And that’s precisely why the unwind has been so aggressive.
At TrendLabs, we’ve been watching that mispositioning closely.
Why?
Because we know that positioning drives markets, not fundamentals.
The unwind of that positioning has already created many opportunities this year.
And it doesn’t stop with staples.
Look at short-term munis.
The iShares Short-Term National Muni Bond ETF (SUB) is breaking out of a textbook accumulation pattern, pushing to its highest levels since 2021:
This isn’t something that’s going to trend on social media.
But it’s real money rotating.
This is the part where people get uncomfortable.
Because buying ARKK feels bold.
And buying staples and short-term munis feels boring.
But our job isn’t to feel virtuous about our trades.
Our job isn’t to own assets that make us look cool at dinner.
Our job isn’t to virtue signal about which industries are good for the world.
Our Job Is To Make Money, Period
For ourselves, our families, and the people we care about.
That requires something most investors struggle with: abandoning recency bias.
Just because something worked recently doesn’t mean it will continue working.
Just because speculative growth recently delivered a 140% rally doesn’t mean you hold it forever.
When price resolves a distribution pattern and the trend changes, get out.
As Ralph Acampora taught us, “Sector rotation is the lifeblood of a bull market.”
When one group falls out of favor, another rises. If you refuse to rotate because it feels boring or because it doesn’t fit your narrative, the market doesn’t care.
It will move without you.
Right now, the evidence says speculative growth is under pressure.
Defensive sectors are breaking out, and bonds are quietly catching bids.
That doesn’t mean this is the end of innovation or that growth stocks will never work again.
It means the leadership baton has moved.
And if your identity is tied to what used to work, you’ll miss what’s working now.
Doing what makes you uncomfortable is often the trade.
You don’t have to like it.
You just have to follow the data.
Everybody’s wrong about what’s exciting.
And if you want to make serious money in this business, you can’t afford to be.
Stay sharp,
Sam Gatlin
Analyst, TrendLabs