Archives for June 2019
“We have lift off” says MAP’s 2nd half top stocks. Studies show only a small percentage of stocks are responsible for most of the gains in the market over decades. That’s what makes MAP’s search for outlier stocks worth it. The best stocks are almost always supported by smart money. That’s what we look for- big money buying the best stocks.
We are almost at the 2nd half mark of 2019, so let’s look at how our best stocks from the last half of 2018 have done thus far. In our white paper, Outliers, on page 12 we show how the strongest stocks tend to crush the market. Well, that’s exactly what happened based on the following chart:
The tickers that made up this hypothetical portfolio are listed here for our members only. We will be releasing the latest batch of tickers shortly after the end of June.
Bottom Line: leaders lead. Take your cues from the information found in how the best stocks trade.
When ETFs dump, get ready for a market pump. As if on cue- when ETFs puke that means the flush is complete- time to buy! Well, usually. We spent a long time researching this and released a big white paper in January studying the effects of an ETF washout. It means there’s a good chance for higher prices ahead. You can read it here.
In late May, we saw a lot of dumping in equities and ETFs. We’ve been very vocal (in our research) that we didn’t expect this selloff to be nearly as deep compared to December. Looking below, you can see how when there are large amounts of ETFs getting sold (red sticks), we tend to see a rip in the market soon after. Late May was the latest ETF dump…interestingly, our data lines up with a recent report of the largest ETF outflow for 2019 occurring in May.
Now, those sell signals are mainly equity ETFs. In times of market stress we also see buying in “safer” ETFs like bonds and precious metals. Below you can see the total ETF signals inclusive of buying. Those big spikes, often, align with market troughs.
Bottom line: when ETFs dump, get ready for the pump.
“I’m catching a wiggle.” Think of when fishing in a pond and the line starts to wiggle. Is it a big fish? Or is it a smart minnow making off with your bait? Wiggles happen on Wall Street trading desks, too. You see, big traders are cautious…and rightly so. Any information that is leaked can and will tip their hand. So when someone is asking about a stock without saying if they are a buyer or seller, that’s a wiggle! It could be a big fish, or just an opportunistic bait seeker.
This morning our data reminded us of “catching a wiggle.” The market rallied hard yesterday after a nasty multi-week sell-off, but what we really saw under the surface was a decent amount of buying in stocks…something we haven’t seen in quite a while. Is it real buying? The short answer is probably. But instead of going on a hunch, we looked back at prior times when the setup looked similar. We need more than just a wiggle.
Here’s a snapshot of our ratio of buying to selling. It sits at 36% because sellers have been in control. We circled areas of declining ratio readings:
To drill down further, this morning we saw 4 things that caught our attention and look quite bullish:
- We logged more buy signals than sell signals in stocks.
- Over 50% of our stock universe (~1400) traded on unusual volume.
- A low percentage of our universe made buy/sell signals, indicating a reversion trade.
- Markets rallied hard yesterday.
Below are the prior times when numbers 2 & 3 occurred when our ratio was very depressed (<40%) with forward returns for SPY (S&P 500 ETF):
Bottom line: when selling slows and buying grows, markets tend to rise. The best stocks out there rise the fastest. In this sea of information, we are constantly looking for outlier stocks. We believe the worst is likely behind us near-term. Once the ratio lifts, markets will likely follow.