by Jason Bodner

January 12, 2021

I remember it like it was yesterday. In 1994, I was 17 visiting my dad in Florida. Life was great. The New York Rangers had just won their first Stanley Cup since 1940. The weather was perfect, and I was off for the summer between college semesters. Pools, beaches, a carefree life, good times, and then…

My girlfriend of two years blindsided me and broke it off hours before I was to fly back to New Jersey to see her. I was devastated but I still made my 3:30 flight. I would be back by 6:20 if all went smoothly…

I should have known better. Somewhere over South Carolina, I was looking out the window to the west and saw a lightning bolt strike the engine on the wing. I watched the engine burst into flames. The plane jolted and lurched. The oxygen masks dropped down. We all looked around, thinking it was a mistake, some sort of malfunction. Someone laughed. Then we saw an unconscious flight attendant being dragged forward and strapped into a seat. She must have hit the ceiling when the plane suddenly dropped rapidly.

The stranger next to me did a Hail Mary and assumed the crash position.

It was surreal. The cabin depressurized and my life felt like it was over before it had barely begun.

We made an emergency landing in Charlotte, North Carolina. We waited in a hangar on the outskirts of the airport for a new plane. This was before cellphones. Alone and freaked out, I did what any 17-year-old boy would. I found the prettiest girl I could. A kiss from “Lucy” somehow made everything better.

When life gives you lemons…

I eventually made it home at 11 am the next morning.

What does that have to do with the stock market?

Look, we all know what’s coming to Wall Street, eventually. The stock market is whizzing to new highs. It’s resistant to everything – contested elections, a blue-sweep with negative tax implications, and a deadly pandemic. The clearest call that stocks are decoupled from reality was Wednesday January 6th. Protesters forcibly breached Capitol Hill in a massed invasion. What began as a peaceful protest was overtaken by insurrection, violence, and death. Stocks couldn’t have cared less. The Russell 2000 closed +4% that day.

Eventually the market cabin will depressurize. I think we’re getting close.

On December 20th, I posted the following predictions based on data:

  • The market went overbought on December 2nd
  • The market will remain overbought until January 13th, 2021
  • The Big Money Index will peak on Monday December 21st, 2020 at an S&P 500 level of 3731.56
  • The S&P 500 will peak on January 18th, 2021 at a level of 3828.50
  • The S&P 500 will then subsequently fall until Monday April 19th when it will trough at 3341.81

I’m waiting for the data to confirm these predictions. Until then, we have plenty of oxygen masks.

Here’s a quick recap of what the data says…

BMI Overbought

The Big Money Index is heavily overbought and starting to lose energy, a precursor to a correction. Markets have been overbought for five weeks, which is right in line with our 30-year historical average. Mapsignals data told us to expect this. We believe the BMI has peaked, which our data predicted would happen December 21st. So far, the peak reading of 91.9% was December 20th, just one day early.

This recent flattening indicates that buying is exhausting itself. Naturally, markets can stay overbought for incredible durations, like last year for nearly six months!

Mapsignals Big Money Index

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Immense Stock Buy Signals

Week 1 of 2021, although marred by Capitol Hill violence, also saw immense buying. Ten out of 11 S&P sectors saw more than 25% of its universe bought in a big way. Three sectors (Materials, Financials, and Energy) saw more than 100% of its universe bought:

Mapsignals Sector RankingsStock buy signals are approaching the stratosphere:

Mapsignals Big Money Stock Signals

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Let’s zoom in on Wednesday’s buying here – in red and yellow:

BMI Close Up

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Typically, mega-buying like this while the BMI is extremely overbought is a sign that things are frothy.

Most buying was in Discretionary, Financials, Energy, Industrials, and Materials… familiar leaders lately.  

Massive ETF Buying

Epic ETF buying in an extremely overbought market historically signals a near-term bearish warning. Looking below, we see that big green ETF buying sticks usually align with near-term market peaks.

This is the pilot warning you that we may encounter turbulent air ahead.

Mapsignals Big Money ETF Index

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

You needn’t freak out or assume the crash position. I’m not bearish for either the medium or long-term. Earnings and year-over-year comps should be great in 2021. But one look at the market’s parabolic rise in the face of negative news tells us we should expect a correction soon.

I see a coming market pullback as a natural correction. When stocks get too lofty, they need to come back to earth. If you’re itching to buy, I’d suggest waiting. My data tells me better prices are coming soon.

Right now, extreme greed is in the air. Signs point to a near-term peak in the coming week or so. Our data also predicts a market peak soon. Put the oxygen mask on. Prep your buy lists now.

We may lose cabin pressure, but if you’re calm and collected, you’ll get through it just fine. I’ve seen it many times in the market – and once on an actual flight. Life handed out some lemons, so I took comedian Ron White’s words to heart: “I believe that if life gives you lemons, you should make lemonade…And try to find somebody whose life has given them vodka, and have a party.”

Ron White comment

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
No Safe Haven Bid in the Treasury Market

Sector Spotlight by Jason Bodner
The S&P 500 Will Peak Within a Week

View Full Archive
Read Past Issues Here

About The Author

Jason Bodner

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

Important Disclosures:

Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.

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