Through The Looking-Glass

Commonplace actions yield conventional results…

Exceptional results often require a different perspective, like gazing through the looking-glass.

Lewis Carroll is beloved for his smash-hit novels, Adventures in Wonderland and Through the Looking-Glass.  He told stories that seemed odd and unconventional at the time. In the first, Alice descends a rabbit’s hole into a literal wonderland full of eccentric types of characters. In the latter, Alice experienced a world in reverse.

Carroll eventually became celebrated as a genius. What eventually elevated him from average writer was from thinking outside the box. Let’s be frank, had he written about everyday normalcy, odds are his art would not still be celebrated today.

And that brings me to the stock market. 2020 was everything but conventional. Stock prices started out racing to new heights, then fell to extreme lows, only to blast into the stratosphere.

To make sense of that insanity, investors can try the normal lens of news and conventional explanations. But doing so will likely yield conventional results.

For something exceptional, you may just need to throw normal logic out the window. You need a new angle. And MAPsignals spent decades developing a looking-glass for the stock market. We see the world through the view of Big Money.

Down the 2020 rabbit’s hole we go! But before we go forward, we must see where we’ve been…

Big Money Index Through The Looking-Glass

Alice: “Would you tell me, please, which way I ought to go from here?”

Cheshire Cat: “That depends a good deal on where you want to get to.”

Alice: “I don’t much care where”

Cheshire Cat: “Then it doesn’t matter which way you go.”

The Big Money Index is now overbought for 2 weeks since December 3^rd:

Of course, that’s not news to our followers. We’ve been harping on Big Money momentum for well over a month now. The key is when you look at cold hard data like we do, it gives us a different perspective. It can differ wildly from the dizzying and often confusing headlines. Our data-driven perspective was different when we said that we have liftoff on November 5th.

Telling anyone who would listen to expect market juice, illustrates how powerful different viewpoints can be. Looking at mainstream headlines showed uncertainty and volatile times ahead.  But we peeked through the looking-glass of Big Money and saw new highs coming.

That’s one example. 2020 was much wilder than that! So, was the Big Money lens giving us a different view than the news?

Through the looking-glass we look…

If you’re memories of big market-moving headlines in 2020 are fuzzy, here are a few to remind you of:

• January 16th New York Times: Stocks Continue Record Climb as Earnings Overshadow Impeachment
• January 30th – Coronavirus claims more lives. “The number of Coronavirus deaths rose to 132 on Wednesday in China, up from 106 on Tuesday. About 6000 confirmed cases of infections also came in, which induced further panic in the country. As of now, five cases of the illness have been confirmed in the United States.” (Yahoo!)
• February 27th – Dow plunges 1,100, worst point drop in history, will Fed act? (CNBC)
• March 20th – Central Banks Inject Massive Stimulus (Yahoo!)
• April 20th – Experimental Drug Resulted in “Rapid Recoveries” (Yahoo!)
• May 29th – Powell: Fed is ‘days away’ from making first loans to Main Street (CNBC)
• June 29th – Fed opens up second part of its corporate bond-buying (CNBC)
• July 20th – US coronavirus deaths top 138,000 (Yahoo!)
• August 31st – Dow & S&P 500 book best August in 36 years (Marketwatch)
• September 21st – Stocks sink as September Gloom continues (Yahoo)
• October 30th – October was worst month for Dow since March as coronavirus was spreading (CBSNews)
• November 18th – Uncertainty over fresh stimulus (Yahoo)
• December 3rd – Stock ETFs Attract Record Inflows During November (Yahoo)

Now for a different view, here they are overlaid on the Big Money Index:

Remember: conventional analysis should produce conventional results. Through the looking-glass of Big Money we were able to navigate without emotion to an entirely different conclusion.

That’s how we’re able to anticipate future market prices; like we did in late January. Back then our data signaled Ch-Ch-Ch-Changes and we foresaw lower market prices.

It works the other way too. Like on March 19^th when our data said to send the marines. The looking-glass view of Big Money allowed us to spot big opportunity.

So, what view does the looking-glass give us today?

Phases Of Big Money

March Hare: Start at the beginning.

Mad Hatter: Yes, yes. And when you come to the end… STOP. See?

It’s essential to understand that Big Money flows in phases. Supply and demand constantly move from one extreme to the other… much like the tides that ebb and flow.

There are 4 broad phases which are detailed below. Two weeks ago, we entered phase 1, where buyers are in firm control and sellers are non-existent:

Overbought markets hang around in phase 1. Markets can stay overbought for a while once they get there. It becomes the investing bonus level, where long-term investors tend to rack up lots of points in their portfolios. But beware: you want to use caution. Pick your spots wisely and be nimble when markets are at stratospheric levels like up here. Stocks are very elevated right now, but can stay that way.

Eventually, we’ll enter phase 2 where buying slows and selling grows. Odds are that hardly any conventional headlines will signal those changes. The looking-glass of Big Money should give us clearer hints, though.

Which brings me to my final thought.

MAP 50 Through The Looking-Glass

White Queen: “Why, sometimes I’ve believed as many as six impossible things before breakfast.”

One of our most popular research pieces is our MAP 50 report. While highlighting the best stocks, it removes a lot of the noise.

It’s created by ranking the 50 stocks that appeared the most frequently on our Top 20 lists the prior 6 months. Quite literally, we stare through the looking-glass of our data to build it each month.

Oftentimes looking back can guide us for the future. For example, we just released the MAP 50 for December, and in it (and each month) we provide the prior report’s performance.

Here’s the performance of the November MAP 50:

The average gain of the MAP 50 stocks in November was ~+10%, while the S&P 500 (SPY ETF) returned only +0.58% over the month! That’s a 17x outperformance… mega juice!

Alice: “This is impossible.”

Mad Hatter: “Only if you believe it is.”

The Bottom Line: understanding markets requires analysis. Conventional analysis yields conventional results. For something exceptional, it requires a different vantage point. Our edge is peering through the looking-glass of Big Money. You can’t find that anywhere else just as you won’t read about wonderland anywhere else.

We chatted about this and other great insights just yesterday in our podcast, Investing Has Changed Forever.

Odds are none of us would know Lewis Carroll today had he went the traditional route for writing.

We like to think outside the box here.

As the markets ebb and flow, the masses follow the mass-media. We choose to travel through the rabbit’s hole and peer through the looking-glass of Big Money.

Wherever it leads, we’ll follow.

Carroll said, “If you don’t know where you are going, any road will take you there.”

We follow the road of Big Money to get to where we ought to be…