by Jason Bodner

November 10, 2020

Unless this is the first news you’ve read since last Tuesday, we need not go over the election results. But, believe it or not, there was some other big news last week, aside from the U.S. presidential election.

When Donald Trump took office, he vowed to get the truth out about UFOs. Four years later, many are still waiting for him to fulfill that promise. As of now, he has about 10 weeks to make good that promise.

Last Thursday, NASA took a step closer in fulfilling that promise when they released a big report about the Milky Way. They said there could be 300 million planets in our galaxy that support life. They are all rocky planets similar to the Earth’s size and they orbit in the “Goldilocks zone,” which is the “just-right” distance from their sun-like stars. Their estimate is an extremely conservative number, by the way. A 2013 study said that there could be 8.8 billion “Earth-like” planets in the Milky Way galaxy alone.

Unidentified Flying Object Cartoon Image

Last week’s election news drowned out this report – and everything else. But imagine we put on some special goggles that could filter out all election news: We’d see that there was plenty else going on.

The same can be said for stocks. It was a HUGE week for U.S. stocks. Let’s look at what happened with similar goggles filtering out all the news and noise, focusing only on Big Money stock market activity.

First and foremost, we start with our Big Money Index (BMI), which is our Mapsignals.com gauge of what Big Money accounts like hedge funds and pension funds are doing with their money. One particularly fascinating and timely part of that report describes how that every election since 1992 saw big money managers selling stocks to reduce their risk ahead of elections, and then buying stocks after. Below we see all election years (now including 2020) from the paper written in September. The yellow line represents the Big Money Index while the blue vertical line is election day. While it’s not precise to the day, we notice a very clear pattern: Selling before; buying after. Once uncertainty is out of the way, risk can be taken with more conviction:

Election Years Big Money Indices Charts

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

In 2020, we see that the buying juice came on schedule, in fact about a month before the election:

2020 Big Money Index Chart

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

The important thing isn’t so much that 2020 played out according to my prediction (which it did), but that we can clearly see the impact of Big Money. When Big Money acts, the market responds – not the other way around. That is why I think it’s such a useful predictive indicator. Big Money bought stocks in a big way since election day. We think that is stock market celebration – not over Biden’s win, but over the likelihood of split powers, a non-majority Senate. If that should (likely) come to pass, gridlock in Washington is usually Wall Street’s friend. It symbolizes “game-on,” as usual.

Let’s look at that buying another way. Below, we see all net stock signals. That means all buying and selling netted out daily. If there’s a green bar – there’s more buying. A red bar means more selling.

You’ll see clear selling (red bars) ahead of election day and then green bars since November 3rd.

Big Money Stock Signals Chart

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

Here’s a zoom-in to make it clearer to see:

Big Money Stock Signals Zoomed Chart

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

Here’s where it gets interesting: It matters what Big Money is buying. Although Big Money came to buy nearly everything, they did not buy everything EQUALLY.

MapSignals Sector Rankings Table

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

We see yellow (representing huge buying of more than 25% of stocks in the sector) in all sectors but Real Estate and Energy. But what stands out to me is that growth sectors got snapped up while the value sectors underperformed. This is a bit of an unwind of the trade heading into the election, when the cautious stance – favoring value over growth – dominated as the future seemed unknown.

Tech caught a big influx of capital. We saw 121 buy signals in tech. Most of the buying was in Software (30 buys), Semis (27 buys), and Internet/Data stocks (30 buys). We also saw big buying in health stocks: Medical Devices, Biopharmaceuticals, and Miscellaneous Healthcare. There was also notable buying in Industrials and Financials stocks. The latter saw focused buying in Insurance and Bank stocks.

So far, the narrative is bullish. We have seen buying after an election in growth dominated sectors. And when we add stellar earnings reports coming out right and left, it only adds to the bullish case.

But there’s one last metric that could be the ignition of the rocket fuel for the stock market… ETFs.

From Wednesday to Friday last week, we observed 87 ETF buy signals. That’s more than we’ve seen in the previous 20 trading days combined. Don’t confuse this ETF buying with the extreme ETF buying we saw in July. We saw extreme ETF buying before, such as June, when we saw 100 ETF buys in one day (June 5th) followed by 90 ETF buys on June 8th. That was a blow-off top that prefaced a Russell 2000 pullback of more than -11%. The ETF buying we saw last week was more indicative of “risk on.”

MapSignals Big Money ETF Index Chart

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

MapSignals Big Money ETF Index Zoomed Chart

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

The calculus is simple: BMI + Growth + ETF = Juice. Big money bought stocks, focusing in growth areas and also ETFs. The election is over and with it uncertainty has been largely lifted. Earnings are working. There is a clear path forward for addressing COVID and the economy. Risk is back on.

Regardless of the back-story, the BMI anticipated what was to come. The market has begun liftoff, and the fuse was lit on election day. The main story was who would become the next president, but there was much still happening outside of the spotlight. It’s time to put the chaos of uncertainty behind us and to focus on prosperity and hope. The true story behind what drives markets and people eventually comes to light. In the words of Buddha, “three things cannot be long hidden: the sun, the moon, and the truth.”

Buddha Quote Image

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
Coronavirus Won the Presidential Election

Sector Spotlight by Jason Bodner
The Hidden Stories Amid Last Week’s Election News

View Full Archive
Read Past Issues Here

About The Author

Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT

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

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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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