I’ll be blunt. Stock portfolios are getting destroyed.
The data is ugly. Today we’ll cover the massive stock selloff in January.
To say this market’s been difficult to navigate is an understatement. What goes up one week gets pounded the next. Headlines change on a dime. Since February, we’ve had constant violent sector rotations.
Growth stocks go up, then down. Reopen stocks go down, then up. Heads have been spinning.
But what’s happening this week specifically is a different tone. As I’ll show you, we’ve seen the most ETF selling since the pandemic lows.
That’s right. There’s incredible turmoil. Descriptive words like carnage and de-risking come to mind.
The seasonally strong January isn’t helping investors. Heck, I made the case where stocks can rally in 2022. So far, the opposite is true.
When you’re a die-hard bull like me, you search for positives in data.
Buying dips worked handsomely in 2021… And for years, it’s worked more than not. I’ve conditioned myself to buy when there’s panic. More on that in a bit.
So, what’s an investor to do in 2022? That’s what I’ll cover today.
But first, we’ve got to cover the massive stock selloff in January. There’s only one way to do it…with data.
Let’s strap in.
Big Money Index Points To Nasty Sector Rotations
The BMI was designed to spot extreme points in the market. When there’s too much buying, it signals overbought. When selling gets nasty, markets get oversold.
On the surface, the BMI doesn’t show how painful the selloff is:
This is because, when the BMI gets overbought and oversold, it signals that the trend of buying or selling is extreme. When buying and selling changes directions all the time, we get choppy data.
That’s what’s been going on for the better part of a year. Looking at the daily action in stocks shows that clearly.
I’ve drawn arrows showing that big selling rarely lasts:
The last arrow to the right is Tuesday’s data. It was a nasty selloff. By all accounts, it looks similar to prior big sell days that didn’t last long.
But the massive stock selloff in January has been more ETF driven. Below, are the daily buys and sells of ETFs. Tuesday rang up monster ETF sell counts:
In fact, we haven’t seen this level of selling since the pandemic low on March 23rd 2020:
This is off the charts action. Equity and bond ETFs have been sold into oblivion.
Tuesday was bad, but nothing compared to the pain we saw in March 2020…so, let’s keep this week in perspective. Yes it’s bad…but we’ve seen much worse.
Now let’s view the massive stock selloff in January through the lens of sectors. Believe it or not, there are a few areas seeing green.
Massive Stock Selloff In January 2022
Last week I showed how Financials and Energy stocks are seeing relentless buying. That’s still the case. And looking at all of the buys of stocks in 2022, it’s clear as day where the Big Money is flowing.
Nearly 50% of all stocks getting bought are Financials and Energy stocks:
In a rising inflationary environment with rates and commodity prices soaring, this intuitively makes sense.
On the flipside, look at where the pain has been YTD. The massive stock selloff in January is concentrated in Healthcare and Technology shares.
Nearly 50% of all stocks sold were Healthcare and Technology stocks:
Rising rates creates rough waters for debt-ladened Healthcare groups like Biotech and hyper-growth areas like Technology.
So, should investors run for the hills? Should we freak out and rush for the exits like the crowd is doing right now? NO!
Believe it or not, some of the best opportunities arise during the depths of despair. Now let’s talk about that.
Focus On Great Stocks During Market Meltdowns
Look, the easy thing to do right now is to be fearful. I’ve found that it rarely pays off in the long-run to sell when stocks are in free-fall.
The hard thing to do is stay grounded. My bet is one day this pullback will be viewed as a massive long-term buying opportunity. Selling like this rarely lasts long. And you better believe that great companies are getting swept up in this meltdown.
Earnings season is just now getting started. Winners will emerge. Don’t give up.
Personally, I sat through many pullbacks: ’08 crisis, October 2014, August 2015, December 2018, & March 2020. Today it’s time to add the massive stock selloff in January 2022 to this list.
Sitting through each of these periods was painful. But you know what? Great stocks eventually rose to the top…and they will again. Odds are it’ll happen when people least expect it.
This is huge because one day selling will stop. Our data will flip. Buyers will rush into stocks again. This is the environment to prepare for that moment rather than buying into an end of days scenario.
That’s where my focus will be in the coming days and weeks.
To our members, if you missed my latest video update released late yesterday, check it out here. There is opportunity…hang in there!
Here’s the bottom line: We are in the midst of a massive stock selloff in January. ETFs saw the most selling since the pandemic lows. Looking at the charts today, selling of this magnitude rarely lasts.
Focus on quality. Selling will eventually pass. Here’s my question to you: Will you be ready?
***And if you want to get more awesome thoughts on this market, check out our latest video: Best Oversold Stocks To Buy Now 2022
When there’s lots of pain, I use our data to search for opportunity.
One video isn’t enough on a week like this. Just to show how there are pockets of stocks rallying, check out : Best Stocks Breaking Out Now 2022
I showcase 5 stocks rising right now.
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