Man, it’s ugly out there! Add up Ukraine, inflation, and COVID, and we’ve got a recipe for the big-time volatility we’re seeing.
So, you may be wondering, is there anyone left to sell? Let’s dive in.
Fans of MAPsignals know we often recommend going against the crowd. And I’m about to show you why the best time to buy stocks is when no one wants to. Then I’ll use MAPsignals’ contrarian indicators to show you the right time to buy.
Warren Buffett famously said: “Be greedy when others are fearful and fearful others are greedy.” Bulls are hard to find these days.
The American Association of Individual Investors (AAII) surveys its 2 million members to see how they’re feeling about stocks. Bullish sentiment has averaged 38% since 1987. The latest reading was only 19%. Investors are about as bearish as they’ve been in 35 years (chart). It makes me wonder: is there anyone left to sell?
That reading looks darn near lows since the ‘80s! But you’re probably wondering, how does this help you make money? Check this out: Stocks do best after sentiment gets extremely negative.
The S&P 500 has returned an above average +6% in the six months after depressed AAII bullish sentiment readings (chart) like above.
I love a good contra-indicator. I also like to use MAPsignals data the validate my analysis. Let’s take a look at some MAPsignals indicators and bring it on home.
Our Big Money Index is a time-proven contrarian signal many use to time trades. It’s telling the same bullish story as the AAII sentiment survey.
BMI readings range from 0-100. Major market lows have coincided with depressed BMI readings under 30. Rarely does the indicator hits the jackpot and goes oversold below 25.
Stocks staged an epic rebound after the BMI bottomed at 10 in March 2020. It’s not quite that low now, but it’s fallen sharply as stocks have been hammered. At a recent reading of 38, it’s signaling stocks are getting increasingly attractive. Check it out:
Take a look at the March 2020 drawdown. It’s a recent proof-point that the BMI can serve as a great contrarian buy signal. After going oversold, stocks went straight up and haven’t really looked back until recently.
Another way to look at that is by looking at when we see immense selling in stocks. Here, I’ve highlighted heavy selling. Notice how it lines up with market troughs?
And finally, we see the same pattern when looking at heavy selling in ETFs. Here we see again, I’ve highlighted instances where ETF selling accelerates. Notice how it lines up with troughs?
All of the prior 3 charts update daily in the Big Money Charts section of the MAPsignals portal for subscribers. It can be very helpful when they line up with other common indicators such as sentiment – like right now.
Staying cool when things get rocky is easier said than done. Sometimes people need help buying low because it doesn’t come naturally.
Using time tested, data-driven and unemotional contrarian indicators can set you up to potentially win. Adding MAPsignals’ proprietary data turbo charges conviction when indicators line up perfectly. And that sets you up to potentially win big.
Is There Anyone Left to Sell? Let’s see:
- Sentiment is very negative? Check.
- The BMI is falling? Check.
- Heavy selling in stocks? Check.
- Heavy selling in ETFs? Check.
- The BMI is not quite yet at oversold levels, but it’s closer than it’s been in a long time. Everything else fits the bill.
The best time to buy is when there isn’t anyone left to sell!
Let MAPsignals data help tell us when we’re just about there…
For more information on adding MAPsignals indicators and stock ranking process to your arsenal, click here to find out more.
***And if you missed Luke’s latest weekly market update, check it out here. These are released on YouTube every Sunday at 2PM ET.
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Alec Young is an investment strategist, working on Wall Street since 2005. He currently serves as CIO at Tactical Alpha LLC.
Prior to TA, Alec spent 15 years in senior investment strategist roles at major financial firms. Most recently, he served as FTSE Russell’s Managing Director of Global Markets Research. Prior to that, he was VP & Investment Strategist at Oppenheimer Funds and served as Global Equity Strategist at S&P Global.
See his full bio here.