Flying South

When the weather cools, birds migrate for winter.

Look up and you’ll see them flying south.

I love that flying-V overhead. We don’t really know why birds migrate.

It may be due to  changing seasons, dwindling resources, or just plain heading for sunny warmth. Flying south happens innately, like a trigger. Essentially, birds listen to inner-signals that have evolved over millennia.

Birds aren’t loners; they travel in groups. It’s a safety measure that’s been internally hard-wired for millions of years.

Let’s think of stocks like birds. Occasionally we see certain flocks of stocks heading south. That signals change for investors and they decide to sell…like we’re seeing now.

Seasons change. Warmth gives way to cold. The over-heated market is colling now. Traders are heading for safety.

Like last week, our data continues with the theme of increased selling. The market migration is here.

Big Money Index Flying South

The Big Money Index shows us the market’s trend. As early as a month ago, our data started signaling changes. And last week we hinted at the silent undertow for stocks.

That trend is increasing. Stocks are heading lower by flying south. Below, you can see that the BMI is now in a downtrend:

The trigger area has been breached: breaking below overbought (circled in red off to the right). I’ve also circled the 2 prior times this occurred. You can see that markets tend to fall alongside the BMI.

Stocks flying south isn’t a new phenomenon. That’s how they behave after extreme overbought conditions. Our BMI was overbought for nearly 12 weeks. Eventually stocks need to breathe.

Popular long positions get crowded (like growth stocks) and exits can be very fast. That’s the market migration we see now.

Big Selling In Stocks Increases

As a reminder, the BMI is made up of daily buys and sells of stocks. If the index is falling, selling is picking up. And that’s precisely what’s happening.

Below is our Big Money Stock Buys & Sells chart. Green bars are buyers and red sticks are sellers. I’ve circled what’s important. But you need to know that only some stocks are flying south.

You can see the same type of action in ETFs. Like the above chart, green bars are buyers and red are sellers.

Like I said above, what’s really interesting is certain groups are falling while other are staying put. Not all birds migrate at the same time…the same goes for sectors.

As I’ll show you, only some areas of the market are headed south.

Sectors Seeing An Unwind

Momentum swings both ways. In a strong bull market, buying in stocks begets more buying. In a falling market, selling in stocks paves the way for more selling.

But the important distinction is, our sell data is not across the board. Only some stocks are being sold while others are getting bought.

Below are our Big Money Sector Indexes. First, let’s look at where selling momentum is increasing. A rising red line means selling is gaining:

Utilities:

Next up is Healthcare:

Lastly, you can see that selling in Tech stocks is starting to ramp:

I don’t want to alarm you but, as nasty as the growth unwind has been, we are nowhere near extremes as previously seen in these charts. If anything, it appears that the migration south is just starting. We expect more near-term selling in these groups.

Contrast this to the reopen sectors: There is zero selling in certain areas.

Like Energy:

And Financials:

Lastly, Discretionary:

Clearly, some sectors are flying south while others have decided to stay put. But, we do expect selling to increase across the board. As we’ve highlighted, growth areas are the pain points.

But this isn’t new. Big Money moves in phases. Sometimes we blast higher for months. Other times we stall and fall.

As a reminder, here are the 4 phases of Big Money. Phase 3 looks to be here…i.e., the near-term top is likely in:

So, let’s wrap it all up.

Here’s the bottom line: stocks are flying south. The Big Money Index tells us to expect more selling. But, that’s only near-term. Market migrations are only temporary.

As long-term investors, we see times like now as areas to get our buy lists ready. Stocks that we’ve watched fly high for months are finally getting to lower prices. Those can be attractive entries that we like.

While the data signals turbulence near-term, just remember that flying south is only part of a bird’s life. They eventually fly north for Summer.

It’s the best of both worlds.

MAPsignals is a market bird watcher. Eventually the season will get warmer for stocks.

Stay alert for when we hear the Big Money bird call again.