Ole Switcheroo

Bam! And just like that things change.

The market pulled the ole switcheroo.

When I was a kid growing up in the South in the 80s, I would go roller-skating. The rink had a DJ and he loved to catch everyone off guard. One minute we’re mellowly gliding to “Heartbreak Hotel” and then suddenly he’d hit the crowd with “You Shook Me All Night Long.”


There was no warning whatsoever. The DJ controlled the crowd and he made his message loud and clear: “It’s time to shift gears.”

That’s the “ole switcheroo.”


Well, the stock market just pulled the ole switcheroo the last two weeks. Veteran investors are aware that being caught off-guard happens. It’s part of the game. How you handle it is the key.

And that’s exactly what we’re witnessing in our data. The rotational rampage came in an instant. Growth-heavy stocks that were once high-flyers took a backseat to beaten down value stocks.

The market mood changed. And that’s the opportunity. It’s not about where we were, it’s about where we’re at.

Now, let’s take the market’s temperature from the perspective of Big Money. Signs point to more upside.

Big Money Index Is Quiet During Rotation

As we’ve been highlighting, the BMI should stay rangebound until the selling from weeks ago rolls off. The Big Money Index is created by taking the latest 5 weeks of data.

The huge buying we see today is cancelling out the selling from a few weeks ago:

big money index is quiet during rotation

This is the top-level view. We have to keep drilling down to see what’s really going on.

Big Money Stocks See Ole Switcheroo

The sector rotation has been violent. Some stocks are completely repricing practically overnight. And that makes sense given the vaccine headlines that keep popping up.

If there is better clarity on a reopening of the economy, certain groups of stocks stand to benefit. We can clearly see the massive green under the surface.

It flies in the face of the selling we saw in stocks prior to the election. As a reminder, our data said to prepare for selling before election day and buying after.

Below is the daily net of buying and selling…circled off to the right is the ole switcheroo:

big money stocks see ole switcheroo

Let’s zoom in on that:

big money stocks zoom in

The shift was abrupt. You can see it better when we look at sector activity.

Value Stocks Are Alive Again

Some rotations are smooth, while others happen quickly. What we can see in certain sectors is the latter.

Prior unloved groups are now ramping higher. And the move is so epic for 2 reasons:

  1. Positive vaccine news means that there are better times to come for the economy (Pfizer and Moderna are showing 95% effective rates)
  2. Some hedge funds are said to be caught wrong-way in the violent shift. That means that unwinding losing bets will amplify these sector moves

Below we can see the velocity of buying in sectors. If the green line is going up, it means that the rate of buying is increasing quickly.

First up is Real Estate:

Real Estate Sector is alive

Now, Utilities:

utilities Sector is alive


discretionary Sector is alive


financials Sector is alive


industrials Sector is alive

And Materials:

Materials Sector is alive

Heck, even Energy is seeing some juice:

energy Sector is alive

Some of these groups hold winning stocks. Some likely don’t. We chat about this in our latest podcast, Reopen Winners.

And while we’re at it, let’s look at the green in ETFs.

ETFs See Mega Buys

ETFs can clue us in on rotations too. Where stocks go, ETFs tend to echo.

Below are the daily buys and sells of ETFs. A green bar means more buyers, while a red bar indicates sellers won the day.

ETFs see mega buys

And we pointed this out last week. The theme still stands…money is flowing into ETFs in a big way. And what’s even cooler is how our data aligns with the recent headline of the largest ETF inflows since the 2016 election.

The bottom line is this: don’t be stunned with anything in the market. Violent shifts happen. Don’t be surprised when the ole switcheroo comes.

What works one day, doesn’t the next. Plan accordingly and think long-term. There are prior winners getting a new lease on life…that’s where our focus is.

When Mr. Market decides it’s time for a change – don’t fight it. Go with the flow.

You don’t need to know the words of the song to skate – just follow the beat.