In heads-up Hold’em, pocket aces have an 81% chance to win the hand.
Can you still lose with pocket aces? Yes.
Right now our data is showing positive signs.
There are good bets, bad bets, winning bets, and losing bets. Making good bets is how you win big over the long-run.
Signs point to pocket aces for Mapsignals – ie, a good bet.
Extreme Oversold Periods Like Now
It’s super rare to see this much selling.
Have a look at our Big Money Index. It tracks big money moving in and out of stocks.
If it’s heading lower, big selling is happening. If it’s heading up, big buyers are showing up.
Last week clocked a 9% reading…that folks, is incredibly rare.
It’s so rare in fact, it’s only happened 4 times since 1990!
Each instance occurred in a bear market, like now.
Below are the 4 times, since 1990, when our Big Money Index fell below 10%.
All prior periods were very dark times for the market.
Many of you remember the Global Financial Crisis – that’s the last time we saw this kind of selling.
But, take a look at the 12 month forward returns – that’s juice…ie, good bet.
The Phases Of Big Money
The Big Money flows in waves.
There are 4 phases we see consistently:
- Huge buying and very little selling – (think FOMO)
- Buying slows and selling picks up – (usually near a peak)
- Buying slows further and selling begins to take over – (a pullback has begun)
- Buying is gone, and sellers are in control – (think bear markets and scary headlines)
Have a look:
We are in phase 4. These are the times to shop for great companies on sale…ie, good bet.
Big Selling In Stocks Is Slowing
Every day we look under the hood of the market.
We measure big money moving in and out of thousands of stocks.
To get a pulse on the market, we group the buys and sells by sector.
If the red line is increasing, selling is increasing. If the green line is increasing, buying is increasing.
Look at how selling is slowing and buying is near zero. Click the images to zoom in.
Here’s discretionary:
Now, financials:
Energy:
Technology:
Bottom line: it’s a scary world out there. Headlines are horrible.
However, if we take a step back and look at things through the lens of data, we see pocket aces.
It’s not about winning every hand, it’s about making good bets.
If you bet when the odds are in your favor, long-term you will win.
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.
THis is all well and good, but we may climb higher, and then contract again becuase people are going to be risk-averse – let’s not belittle, could be scary still
Hey Emil –
You are absolutely correct. We could contract.
Clearly, times are very rough for many people.
We just look at the market from the lens of our data.
There are prior periods of hardship that we can look back on for limited guidance.
The glass is half full from our vantage point.
Sure, if you look at stocks as being represented by the value they had in the past years compared to now then yes it’s a great time to buy.
However, I can see a lot of optimism in the US markets when discussing the threat of the virus, the social and economical implications. Currently, here in Europe, the amount of death, fear and pain that’s ravaging countries is going to have a major impact on consumer behaviour over the long term, no amount of fiscal relief (or stimulus) will change that, companies are built by people and they’re going to underperform after this. Let’s not forget that the economy is now global.
I’m definitely not grabbing any stock for the time being. I hope the virus will treat the US lighter than the EU.
What about the bear market rally trap? Many are expecting a retest of the lows….
With Q1 results/guidance coming out this month, that seems to be a real possibility. So, shouldn’t we be waiting to see if they will be further carnage through May? Or is the data suggesting to start getting back into the market regardless, albeit at a gradual pace…
Many are calling for a bear trap and a retest of the lows.
Our goal is to look out past the near-term and see if the setup is favorable.
Based on the data we have, it is favorable.
Even if we retest lows, our strategy would not change.
This post is not an all-clear signal, but it is shedding light on a potential shift in the data…a positive shift.
While we are in a bear market we will continue to pick our spots and buy quality names.
If we are the only positive data-point out there in a sea of red, we’ll own it!
Based on your ave return over time data, it seems waiting till 3 months after is the preferred strategy as the ave returns are still neg at month 3?
That’s right. We expect decent volatility over the next few weeks to months.
There’s even the potential for a retest of the March lows.
But, the good news is that there is light at the end of the tunnel.