In French, baton rouge means red stick.
In Louisiana, French explorer, Iberville, was moving along the Mississippi River when he saw a stick that appeared red. He named the region, Baton Rouge.
That red stick marked a boundary for local Native American tribes.
Big Money Index Says Sellers Are In Control
For Mapsignals, a red stick also means a boundary. On January 30, we wrote how our data is changing. Selling is picking up.
Our Big Money Index has a big red stick on it. It acts like a boundary in our research. Typically you don’t want to add stocks in that area. You want to wait for a pullback.
Now, we can take it a step further and see how big the selling was yesterday. The takeaway is how big selling usually brings more big selling.
The Big Money Flows in Phases
So, where are we in the stream of things? Here’s how the big money flows:
- Big money rushes in and selling is non-existent (where we were for months…think FOMO)
- Big money buying slows and selling picks up a bit (that’s where we’ve been the last few weeks, until yesterday)
- Big money buying slows further and selling grows – (this is when the BMI starts falling towards 50% and lower. We are approaching this phase)
- Big money buying is gone, and sellers are in control – (this is when the media blasts bear articles…it’s when you want to get those buy tickets out)
It looks like this:
So, what’s the game plan?
Once we break below 50% -I get excited. That’s when many professional investors are forced to sell stocks because they get the tap on the shoulder from their risk manager.
Let’s embrace the pullback and be patient. Embrace the red stick.
Bottom line: Like many of us, you may have missed the train of selling that happened at the end of January. It was like a flash sell-off, lasting just a day.
We will keep our cool and focus on patience and process like we discussed last week.
Right now it’s a red train approaching the platform.
When the attendant yells, “tickets please!” We’ll be showing our tickets… and you can bet they won’t be sell tickets.