Someone once told me something I’ll never forget: “Just come out and say it.”
So, here it goes: “stocks are heading lower.”
Do I think the world is ending? NO.
Do I think stocks will be cheaper near-term? YES.
Here’s why:
Every morning I study our data, looking for stories. It’s my version of a newspaper.
I start asking myself questions like: “what’s really going on?” or “is there a shift?” “What’s coming for stocks?”
Every so often a shift begins that says stocks are heading south. Recent action is such a shift.
There’s no other way to put it. Brace for more volatility.
That statement may scare some people. But, to us at MAPsignals, this will be another great opportunity to scoop discounted stocks. That’s how we’ve done it for years. That’s how we’ve won big. So, that’s how we’ll do it in the coming weeks.
Let’s look over the data.
Big Money Index Says Stocks Are Heading Lower
We need to start from the top. Where is the Big Money going?
Last week’s post, Big Money Index Signals Red, was the beginning of a big rotation in stocks. We mentioned how the Big Money Index was approaching a red light.
We didn’t expect there to be an investing bonus level like we’ve enjoyed in the past. Since that post, the BMI has deteriorated further:
If the Big Money Index could talk it would say: “stocks are heading lower.” (MAPsignals subscribers can follow the BMI in real-time here)
There’s plenty more happening so let’s continue…
Stock & ETF Volumes Are Exploding
Daily volumes help tell the real story with stocks. And volumes are ramping while prices are falling, signaling de-risking.
Below is our Daily Big Money Volumes chart. Those big bars circled to the right show big trading activity according to MAPsignals. We measure it by looking for unusually large volumes to simplify. We can see that stocks and ETFs are seeing a lot of increased trading.
Tuesday & Wednesday (yesterday) saw a massive uptick in trading:
In short- the BMI is falling while stock volumes are exploding. This is another datapoint saying, stocks are heading lower.
Why so? Because when volumes inflate, trends tend to reveal themselves. Recent action simply states that sellers are here. Let’s look.
Below is the Big Money Stock Buys & Sells chart. It plots the daily total of buys and sells in stocks. If selling increases, it will weigh down the BMI.
Yesterday was the single largest day of selling since March 4th:
Also, note how buyers were absent yesterday, too:
When the buyers vanish, it’s another tell that stocks will head lower.
What about ETFs? Is there a story there?
This is where it gets really interesting. Last Friday signaled a bearish data point. There were a lot of ETF buyers. Ironically, that usually signals a near-term peak for stocks.
Check it out:
Also notice yesterday’s big red stick:
(this auto-updated chart is available to subscribers here)
I hate to be the bearer of bad news ladies and gentleman, but everything in our data points one direction: lower.
Strap on the helmets. It’s going to be bumpy. That means prepare for up days and down days.
Let’s wrap this all up.
Here’s the bottom line: Stocks are heading lower. This is not the time to freak out and become a sad bear. Nope. It’s natural, needed, and helps refresh the market like the forest floor after a fire.
Be a happy bear. See opportunity like us. Get a game plan.
If selling keeps rising while the BMI keeps falling, that’s going to present a great opportunity to opportunistic buyers. At MAPsignals, we buy outlier stocks on sale. Because, that’s what happy bears do.
MAPsignals is my morning paper with the headline: “Stocks are heading lower.”
The weather section says a storm is likely here. Sellers are whipping up volatility like a nasty thunderstorm.
But the calm after is usually lovely and when things blossom again.
Smart bears ride out the rough winter, slumbering in the safety of a cave. We’re building our buy list now as we hibernate. We use big pullback days as areas to add to great stocks.
We’ll look to resources like the MAP 50 (new one coming out Saturday!) and our weekly MAP 20 reports.
To be clear- we don’t see a bear market, we see a much-needed correction. This is a good time to trim up the fat and sit tight.
But don’t sleep too long.
Eventually Spring season comes. And outlier stocks, like grounded birds, will fly high again.
***ALSO, Luke and Jason will be presenting for the Moneyshow June 11th & 12th in Orlando. The duo will be doing what they do best: Following the Big Money to find outlier stocks.
The best opportunities come when stocks are heading lower!
Come meet them in person! Click the image below to sign-up!
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.
Big Money Index Signals Red
I am glad this insight was released at this time. I drew some trendlines on the BMI and the one using the low points on 3/31 to 4/22 has the BMI touching that line just now. I was thinking this was going to be the turnaround to the top of the trend using high data points of 3/15 to 5/4, and I was just about to buy some long ETFs. We are currently touching the low trendline, so I thought that was a buy signal. The information you provide based on the buy/sell data is great. Thanks.
There is another trendline which starts on 10/2 through 3/15 and is just little bit lower on the low end. It looks like it may be around 66% to 67% eyeballing it.
I see you use the BMI Stock Buy/BMI Stock Sell volume chart in your insight articles when referring to the BMI data. Is that available to me someplace on the site? I don’t see it by the BMI chart like it is incorporated into the ETF chart. Maybe I am missing something. I’m a new subscriber. That information would be great to have on a daily basis rather than waiting for your next article. Thanks guys.
Hey Gregory –
We are working on more of these charts for subscribers. We have a lot more in store coming later this year.
Thanks for all of this feedback. It lets us know what our subscribers want. Eventually, you won’t have to wait for a blog post. You’ll have everything at your fingertips!
How do you suppose one hedges there positions if they don’t want to sell?
Call options on the vix or put options on the spy?
I have lots of tech and growth stocks and would be more comfortable weathering the storm if I had a short position that was profiting while my account takes a hit.
When I think the VIX may start popping with volatility I buy UVXY. Only for very short term positions. I just bought it Monday at 4.03 and sold Wednesday at 6.10. Leveraged at 1.5 to VIX. Or VIXY which I believe is not leveraged. Lots of deterioration on those, so short term holds only.
@Gregory: Nice idea to use a trendline for the BMI! I have just discovered that the charts for subscribers at https://mapsignals.com/big-money-charts/ have some charting tools available. They are on the left of the chart, possibly hidden behind a small arrow.
Looking for a service to guide my portfolio but doesn’t look like BMI index is one of them. Basically, you called the Top at the Bottom on 5/13. BMI doesn’t seem to have any predictable characteristic, if you look at the chart, when the market goes up, buyer comes in and you see green bar.
Hey Julian –
If you are basing the validity of the BMI since 5/31 and disregarding how it performed leading up to the pandemic, during the pandemic, calling the pandemic bottom, then the post-pandemic rally, the election of 2020, and countless other spot-on calls then suit yourself.
It’s an amazing tool. We even have a white paper on it going back to 1990. If you’re looking for a miracle indicator, look elsewhere. The market has been sideways for well over a month, just as the BMI has.
No need for me to defend it anymore. Thanks for writing in.