• Menu
  • Skip to right header navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

MAPsignals

We map big money.

  • Latest Insights
  • Power of MAP
    • MAP Products
    • MAP System
    • MAP White Papers
    • Videos & Interviews
  • Profit with MAP
  • About
    • About MAP
    • MAP Team
    • Authors
    • MAP System
    • MAP Products
    • Big Money Index
  • Members
    • Get Started With MAP
    • My MAP
    • Big Money Charts
    • MAP View
    • MAP View Options
    • MAP Top 20 Weekly
    • MAP 50
    • Member Updates
    • Platinum Updates
    • Members Only Posts
    • Performance
  • Portal
  • Latest Insights
  • Power of MAP
    • MAP Products
    • MAP System
    • MAP White Papers
    • Videos & Interviews
  • Profit with MAP
  • About
    • About MAP
    • MAP Team
    • Authors
    • MAP System
    • MAP Products
    • Big Money Index
  • Members
    • Get Started With MAP
    • My MAP
    • Big Money Charts
    • MAP View
    • MAP View Options
    • MAP Top 20 Weekly
    • MAP 50
    • Member Updates
    • Platinum Updates
    • Members Only Posts
    • Performance
  • Portal

Big Money Index Approaches Oversold

May 5, 2022 //  by Lucas Downey//  Leave a Comment

Stocks keep getting sold. Many companies are in a bear market.

As the Big Money Index approaches oversold levels, what does it mean for stocks going forward? I went back in our data to help answer that question.

Big Money Index Approaches Oversold

Last week I gave the warning that buyers disappeared in our data. And after another week of signals rolled in, that theme hasn’t shifted.

And there’s the possibility that we’ll trigger oversold in the coming weeks. As terrible as that sounds at first glance, it’s actually our most bullish indicator.

Let me show you why.

Big Money Index Approaches Oversold

For most of 2022, the market has acted like a washing machine. One week, growth stocks get sold while defensive areas thrive. Another week that theme reverses, etc. It’s been challenging to spot long-lasting trends.

When there’s a tug-of-war under the market’s surface, the BMI becomes rangebound: unable to reach any extreme readings. But starting on April 21st, a new theme emerged. Buyers vanished, causing the Big Money Index to fall hard.

In 2 weeks, the BMI fell from 71% to 42%. That’s a violent move lower:

BMI falls hard as buyers vanish | Big Money Index

Above you can see how intense the fall has been. It’s simply due to near-zero leadership. Using Wall Street talk, we’re witnessing a “correlation of 1 market.” That simply means that stocks are acting similar, rather than rotational.

When most stocks are getting sold like now, correlation is high. Below you’ll observe this shift:

buyers collapse last 2 weeks | Big Money stock buys and sells

The lack of buyers is the simple reason the BMI is in free fall. The current reading is 42%. That means that the 25-day moving average of buys to sells represents 42% buyers and 58% sellers. To reach oversold, the ratio of buyers would need to fall to 25%.

At the current rate, it’ll take another 2-3 weeks of similar action to get there. Yep, a rough few weeks is the soonest we could reach the rare green zone.

If you’re curious what oversold triggers look like in recent history, check it out. I’ve noted the prior 6 instances when the BMI breached 25%. The green horizontal line represents extreme selling that rarely lasts.

The latest one was March 19th, 2020:

6 oversold readings since 2014 | Big Money Index

One look above and you should notice a few things. First, it’s a rare occurrence to hit oversold. Only the nastiest selloffs reach this ugly climax. The pandemic collapse 2 years ago gives you an idea of what it takes to get there.

Second, these epic pullbacks, while excruciating to sit through, tend to be amazing buy opportunities. Just using the ole eyeball test, the 6 green bubbles appear at or near lows in markets.

Third, typically an overbought reading happens soon after going oversold. Yep, stocks tend to rocket higher in a monster way.

I did a bit more digging to find out what we can expect as the Big Money Index approaches oversold levels. History shows it’s a good time to get the buy tickets out.

Let’s look at that now.

Historical Returns of an Oversold Big Money Index

I’ll level with you. Most know me as always being positive and bullish on stocks over the long-term. That’s because I’ve benefited personally in my own accounts. As I see it, owning great companies can multiply your wealth like few things on Earth.

But an oversold BMI has the power to turbocharge returns. They’re super rare, though. Since 1990, it’s happened only 20 times. Basically, they come around every 1.5 years on average.

Below I’ve outlined all instances. You’ll see the first day oversold triggered, how long it lasted, and the market trough afterwards. I’ve even included the periods that include recessions. Have a look:

(Click image to enlarge)

Average days to through and % drop taken from periods of greater than 1 day

Now, that’s a lot of green! Out of 20 oversold periods, the average 6-month return for the S&P 500 is +9.6%. One year out the index climbs 16%. And 2-years out, it’s a blistering average gain of +29.2%!

Sure, there were a couple of very red periods like the Global Financial Crisis of 2008 and the 2001 pullback. But even with those results included, the potential rewards are off the charts.

Now look, I know the markets are tough right now. Plenty of my stocks are down, too. As I like to remind myself, “it happens.” But don’t give up. It won’t always be doldrums for stocks. I’m serious.

As the Big Money Index approaches oversold levels, view it as a massive long-term opportunity. As value investor Shelby Davis once said, “You make most of your money in a bear market; you just don’t realize it at the time.”

He’s right.

Let’s wrap up.

Here’s the bottom line: Buyers have been absent in our data for 2 weeks. The BMI is cratering. But as painful as selloffs are, they eventually pass. And in some rare instances, stock selling gets overdone.

As the Big Money Index approaches oversold conditions, focus on the opportunity. The average jump for the market 24 months later is nearly a 30% gain. That’s worth looking forward to.

I’m taking the time now and building a buy list. History shows it’s a smart bet.

If you’re looking to monitor the BMI the next few weeks, sign up for any subscription level here. All levels get access to our automated portal.

Lucas Downey
Lucas Downey

Lucas is co-founder of MAPsignals. His full bio can be found here.
Prior to MAP, he was Head of ETF Sales at Cantor Fitzgerald & SVP of Derivatives at Jefferies, LLC.

Spread the word!

Category: All, Big Money Insights Weekly

Previous Post: «Best Oversold Stocks to Buy for May 2022 Best Oversold Stocks to Buy for May 2022
Next Post: Market Volatility Update Market Volatility Update»

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Get Big Money Insights for FREE

Want to know where the Big Money is headed?

Just enter your email address below. You'll get our FREE NEWSLETTER sent directly to your inbox.

We call it Big Money Insights... It’s your weekly sneak peek at the powerful market-moving forces that are hidden from 99% of investors.

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Categories

  • All
  • Big Money Insights Weekly
  • Big Money Series
  • Macro Insights
  • MAP In The Media
  • Members Only
  • Performance
  • Podcast
  • Special Reports
  • Stocks
  • Videos & Interviews
  • White Papers

Archives

  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018

Follow us on Twitter

MAPsignals Follow 1,434 1,061

MAPsignals is a data platform that tracks institutional money flows in stocks and ETFs. Sign up for free insights here: https://t.co/SaAVHjKC9J

mapsignals
mapsignals avatar; MAPsignals @mapsignals ·
54m 1621476848990359552

Pendulum has swung

Helene Meisler @hmeisler

Highest volume for the QQQs since 12/13

Reply on Twitter 1621476848990359552 Retweet on Twitter 1621476848990359552 0 Like on Twitter 1621476848990359552 0 Twitter 1621476848990359552
Load More...

Footer

© 2021 Mapsignals.com

  • Home
  • Contact & Disclaimer
  • Privacy Policy
  • Terms & Conditions
  • Opt-out preferences
  • FAQ

Copyright © 2023 · Mai Law Pro on Genesis Framework · WordPress · Log in

✕
What Happened to Risk Assets White Paper is Here

Get your copy here and take a journey through our thoughts on margin and leverage.

Enter your email address below and you'll get our FREE NEWSLETTER sent directly to your inbox. 

 We call it Big Money Insights... It’s your weekly sneak peek at the powerful market-moving forces that are hidden from 99% of investors.

MAPsignals
Manage Cookie Consent
We use cookies to optimize our website and our service.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
View preferences
{title} {title} {title}