by Jason Bodner
November 28, 2023
Roller coasters can seem terrifying, but they are surprisingly among the safest rides around. The odds of dying on a roller-coaster are 1 in 300 million, according to data from the U.S. Consumer Product Safety Commission. That may sound like one chance too many, but compare those odds to these other dangers:
Lifetime odds: Chances of dying from a:
- Plane crash: 1 in 11 million
- Train crash: 1 in 243,756
- Dog attack 1 in 53,843
- Cataclysmic storm: 1 in 20,098
- Sunstroke: 1 in 4,655
- Choking: 1 in 2,659
- Car crash: 1 in 103
- Falling: 1 in 98
Source: National Safety Council (2021)
Based on those odds, you are in most danger while walking (by falling) or driving (a car crash). But, fear is irrational, and nothing stokes investor fear like a wickedly volatile market. As we approach the year’s final month, 2023 was a good but unenjoyable test of investor resolve. The first quarter was an emotional roller coaster. January and February were promising, until March brought a banking crisis, which told us not to get too excited. April through July was lovely, but then came the reminder that the third quarter is the worst, but history (since 1990) suggested that October would provide relief. Alas, it didn’t deliver.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
October was miserable, sending stocks (and moods) reeling. But, here in November, a major switch has begun. It happened so fast, we hardly had time to enjoy it. Major indexes don’t properly portray pain felt in pockets of the market, but it tells a disappointing story. According to Y-Charts, The S&P 500 did this:
But, for November thus far, the S&P 500 is +8.71%, erasing much of the pain, but not much of the anxiety. The Big Money Index (BMI) has also risen swiftly from oversold, lifting the market with it:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As October ended, selling evaporated and buying began in both stocks and ETFs:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Given that October and November have been so divergent this year, I thought it would be interesting to look at them versus historical averages and see what the future might hold. This year, October was a very red month. Obviously, many stocks – particularly growth stocks – got taken to the woodshed. It was ugly.
If you look at the chart on the left, the red (selling) is unmistakable. In stark contrast, the chart on the right for November, the red was reduced as the month went along, then scarce.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Selling shrank in November (over October) by a factor of nearly 5x, and unusually large buying surged by a factor of 3x. That’s a seismic shift by any standard.
What interests me further is how that buying and selling broke out. If we look at buying versus selling in October, we see that selling was pretty uniform – since the entire market was under pressure.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
We can see that inflows in November were heavy in growth areas like tech and discretionary. Financials also saw big inflows of capital. But, don’t let those pie charts fool you. In October there were only 416 buys versus 3,476 sells for the month, so that seemingly large energy buying wasn’t so large compared to the immense selling. The buying in November, however, was significantly larger than the selling.
November saw 963 unusually large buys against 543 sells, and that’s with almost a week remaining.
Visually, the two months break down like this:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Let’s look at how that compares with history. I looked back at unusual buying and selling data since 1990. Below we see the monthly averages spanning those nearly 33 years, including all data to this year:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Notice a couple of things off the bat… January, February and November are the strongest buying months of the year, while October is strong in both buying and selling.
This correlates nicely with the seasonal returns chart (at the start of this article).
Now let’s overlay October and November of 2023 to see how they compare to history:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
What we plainly see is that October was downright terrible in terms of immense selling. And, November, as wonderful as it might feel, is just below average since 1990 in terms of buying and selling.
Lastly, let’s see how the rest of 2023 shook out so far versus the historical averages:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
March, May, September, and October were all substantially above average when it came to massive 2023 selling. January, February, June, and July were all above average in terms of 2023 buying. So, this year is proving to be more volatile than usual, not just in terms of performance, but also in terms of money flows.
Interestingly, that buying surge in November, as we mentioned, was led by tech stocks. That has lifted technology back into the top spot for sector rankings. Discretionary is a close second followed by energy.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Energy continues to face some pressure as the price of oil continues to retreat. Looking at a chart of USO – the United States Oil Fund ETF, we see it peaked in September and has been in a down-trend ever since. Oil rebounded a bit after breaking below $70, but it remains under pressure:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The bad news is that October’s selling was way above historical averages. The good news is that October is behind us. We now have strong seasonality on our side. November has already proven to be great, with massive performance for stocks, and near average buying and selling. Revisiting our seasonality chart, we can see that, as we head into December, we can expect strong stock performances through April.
Let’s enjoy it. Like Hunter S. Thompson said, “Buy the ticket. Take the ride.”
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
While America Gave Thanks, the World Was in Revolt
Income Mail by Bryan Perry
The Bullish Case for U.S. High Yield Bonds
Growth Mail by Gary Alexander
Beware Hot, Trendy Sectors (I Favor Unloved Essential Sectors)
Global Mail by Ivan Martchev
New Volatility Lows for 2023 Indicate a Coming Overdue Small Correction
Sector Spotlight by Jason Bodner
The Market Roller Coaster Starts Rising Again
View Full Archive
Read Past Issues Here
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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