Consensus says stocks are doomed. Negative sentiment has investors spooked.
Our constructive view has been betting against the crowd all year. So far, that’s been the winning ticket.
The flow of money paints a strikingly different picture of investor appetite than the media headlines suggest. Consider the following:
Just this week, J.P. Morgan released a poll asking clients, Where do you see the S&P 500 at year end? Of the respondents, only 5% saw the index at 4250. More to the point, nearly 95% of the results pointed to a level of 4000 or lower.
Another survey out of Bank of America showed how fund managers are the “most bearish” all year.
You know what this tells me? The crowd is on one side of the boat… and as General George S. Patton famously said, “If everyone is thinking alike, someone isn’t thinking”.
Luckily, our data does the thinking for us. Each day it sifts through the noise, tallying the flow of money. It tells the real narrative: Stocks are still getting accumulated. Many are thriving.
Let’s cover the data landscape. Odds are the crowd is wrong.
Betting Against the Crowd
The Big Money Index (BMI) has been THE analog for the market the past year. Each time extreme zones were breached; monster reversions came soon after. I’ve outlined those powerful overbought and oversold pivots below.
Circled off to the right you’ll see the BMI’s latest move. The train is chugging northbound as healthy buying in select stocks is the theme. A rising market tide flies in the face of the crowd’s bearish stance:
The current reading of 50% suggests we’re in the middle of a transition as new money is being put to work. This shouldn’t come as a surprise.
We’re capping off a historically bullish period for stocks. If you recall, back in November I made the case how there’s a post mid-term election year playbook.
Since 1980, November – April of midterm election years have recorded strong returns for the S&P 500. Amazingly, the 10 prior instances were positive 100% of the time with an average gain of 12.93%.
The following year posts enviable returns too, with an average lift of 15.73%:
The playbook in 2023 is following history to a tee as the positive streak is set to continue. Since November the S&P has ramped 8.66% as of April 19th, in stark contrast of extremely negative sentiment. Betting against the crowd has paid off.
Investors telling themselves, “I’ll sit this one out” have missed a major rally in the indexes. The overlooked opportunity in single stocks is worse.
This is where a data-based narrative shines.
Each week we group all of our proprietary institutional buy and sell signals and rank each stock based on fundamental attributes like expected earnings growth, sales growth, debt levels, and more. What this does is sift the wheat from the chaff.
Quality rises to the top and leaders emerge. At MAPsignals, we’re only interested in the top dogs in the market… the outliers.
Below is blurred snapshot of our Top 20 list from 3-28-23. These 20 names are the highest ranked stocks in our research responsible for the latest lift in the BMI.
These aren’t your average companies. Each of them sport healthy forward fundamentals and many reside in the Technology and Discretionary space, exactly where the leadership is.
Notice in the middle lists the MAP score, followed by the technical rank and fundamental rank. Then see the bigger message boxed in yellow – The top stocks continually show up on this report because Big Money investors keep accumulating:
Many of the showcased stocks are up double digits. So, when you read constantly how our data is constructive – now you know why. Our algos are spotting the opportunity in a sea of negativity.
As an RIA subscriber of ours said yesterday, our data analytics is the most powerful research source they use. It’s humbling to read that!
Data is beautiful and cuts through the noise.
Don’t follow the crowd. Follow the Big Money. Right now it’s telling us to stay long high quality stocks regardless of the overwhelming bearishness out there.
Let’s wrap up.
Here’s the bottom line: Investors are bearish on stocks. Most can’t imagine higher levels in 2023. However, our data is pressing higher, with the BMI hitting its best level in 5 weeks.
Plenty of high-quality stocks are thriving. Betting against the crowd has been a great strategy in 2023.
If you’re looking for an analytical voice, differentiated from the crowd, get a MAP subscription today!