by Jason Bodner

December 15, 2020

Salvino D’Armate is most often credited with the invention of the first wearable eyeglasses around 1284.

The First Spectacles Inventor Image

Thank God for Salvino! When I was a kid, I had terrible vision. My earliest memories are sitting in the ophthalmologist’s chair looking at eyecharts. The letters were fuzzy until the doctor lowered the scope.

Different lenses would snap things in and out of focus. I have a unique eye condition: My eyes don’t work together. I literally have two different views of everything – all the time.

It may sound annoying, but it gives me a unique perspective on life.

My favorite thing to see with two independent eyes these days is the stock market.

In today’s first part of a two-part series, I will look back at 2020, a year like none other, through a variety of different lenses, creating different views, and a more focused picture of what transpired.

Looking Back to a Hopeful January of 2020 

On New Year’s Day 2020, most of us were ecstatic to leave 2019 behind. First, we saw an incredibly bullish January. Then COVID-19 dramatically changed everything. The world faced its first pandemic in at least 50 years. March brought insurmountable fear and darkness. Stocks fell drastically as COVID altered the fabric of our lives. Tens of millions were infected as millions died. Millions of jobs were lost.

But looking back now, we seem to be in a better spot. I am always an optimist. But even back then, I bet on America’s future by looking for great deals on outlier stocks. I knew we would recover, as we always have.

With several vaccines on the horizon, we will come out of this stronger than ever. Now, I’m more positive than before. I’ll get to that later, but first let’s look at 2020’s volatile year through a few different lenses.

Most see the world through the lens of the news. 2020 had some of the most colorful headlines we will see for years. Let’s review just a few that stood out – two January headlines, then one for each other month:

  • 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)

As you can see, most of these headlines were written by the “doom and gloom” crowd, mostly because humans are drawn to scary headlines. The average person favors a story about catastrophe over happy prospects. That’s mostly an evolutionary genetic code, since focusing on external threats kept us alive, so it’s no surprise then that most of the above headlines (except the first) are predominately filled with misery.

But what happens when we put on a new lens and look at the same year through new spectacles?

Here is a chart of the Big Money Index (BMI), which is an accurate and timely indicator of where huge professional investors are moving their money. It’s created by scanning and ranking 5,500 stocks every day.

The BMI process assesses the health of each company via sales, earnings, debts, and profits. It also looks at its stock mechanics: How is the stock trading, price highs and lows, etc. It ranks them strongest to weakest, then it looks for when Big Money is buying the best stocks. My research firm then aggregates the buy and sell signals on a 25-day moving average. When we plot the BMI over the S&P500, it’s a powerful story:

MapSignals Big Money Index Chart

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

Look at the yellow line. When it rises, big money is buying. When it falls, it is selling. Below the green is oversold (we’d expect a rebound). Above the red is overbought. We are there now, but it can last a while.

The BMI peaked at the end of January 2020. Stocks still rose for three weeks and then plummeted. I warned you it would happen and was right. Granted, I didn’t know that a global pandemic would wreck life as we know it, but Big Money sure sensed something was about to change. Buying became unsustainable – and then vanished. Big Money foresaw it and dumped stocks on unsuspecting everyday investors who kept on buying until the market dropped like a rock. Notice how Big Money was selling well before that?

In early April, the mood was awful. The BMI signaled a heavily oversold market. I told anyone who would listen to buy stocks. It was unpopular but the data told me I was right. The BMI prefaced a monstrous rise in stocks. Stocks went Overbought on May 6th, and I warned that this condition could remain for a while. Again, I didn’t know that the market would stay overbought for four months, breaking my previous records.

Once that index started to fall from overbought, the market followed into a volatile patch.

Next, I looked at the BMI in every election year since 1990. I noticed that Big Money sells ahead of elections and buys thereafter. It makes sense: If you manage billions, you like to bet on sure things. Elections are anything but certain, in advance. Right on schedule, the market did what I thought it would.

Big Money has been buying ever since the election and vaccine news. Now we are overbought again. Remember, I said it can stay overbought for quite a while. My data says the BMI should peak January 6th.

When the BMI starts to fall, that indicates a near-term market peak nearby. That’s the ideal time to take profits, raising cash to buy outlier stocks – when they go on sale.

That brings us to my outlook for 2021. (To be continued next week…)

“Human beings can only make sense of the world through the lens they were socialized to make sense of it through.”

-Robin DiAngelo

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

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Tesla’s Stock is Up, But for How Long?

Income Mail by Bryan Perry
The “Unmasking” Of Market Risks In 2021

Growth Mail by Gary Alexander
My Top 10 New Books for A Crazy Year Soon Ending

Global Mail by Ivan Martchev
Whatever Happened to Bitcoin?

Sector Spotlight by Jason Bodner
2020 in Review & My 2021 Preview (Part 1 of 2)

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

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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