by Jason Bodner

December 28 ,2021

It was an exciting week. While children all around the world got to rejoice in the excitement of December 25, space-nerds like me were more excited about December 22nd – an amazing day for the study of the cosmos – when the James Webb Space telescope was launched, succeeding the Hubble Space telescope.

The Hubble made thousands of discoveries. My favorites were from the Hubble Deep Field (HDF) and Hubble Ultra Deep Field (HUDF). In simplest terms, they allowed us to understand that there are many more galaxies than we ever imagined possible. For instance, the following image was taken focusing Hubble on a pinhole sized piece of dark sky. Each dot is a galaxy, each with hundreds of billions of stars.

This image alone contains an estimated 10,000 galaxies.

NASA scientists now believe that there are at least two trillion galaxies out there.

Scientists have discovered thousands of planets outside our solar system, and just last week scientists announced they discovered 70 rogue planets with no star at all. With an estimated two trillion galaxies, each with an assumed 100 billion stars, and each star with an average of two planets, that’s 400 sextillion planets out there. If I did my math right, that number is four followed by 23 zeroes and looks like this:


By contrast, we can occasionally see at most five planets in heaven with the naked eye. This is a great example of what’s immediately observable dominating our view of everything. It happens in the stock market, too. When markets are down, my neighbor invariably asks me, “Why are stocks down?” (He invariably means the S&P 500 index or the Dow Jones Industrial average, the most popular indexes.)

The Dow was the first major index, introduced in The Wall Street Journal on May 26, 1896, as a thermometer for the stock market. Its main shortcoming is that it contains only 30 stocks, so in 1957 the S&P 500 index came out, tracking 500 companies in an effort to create a better yardstick for the overall market. It is a much better gauge of activity, but it also has shortcomings. Just like we think of those five planets we can see, the S&P 500 falls victim to the same thing – five dominant stocks out of 500.

Based on data I collected from FactSet, the market value of the 500 stocks in the index totals $44.5 trillion. That’s a big chunk (92%) of the total of all listed stocks of ($48.5 trillion according to Siblis research in September of 2021). The shortcoming arrives when we consider the S&P 500 is weighted by stock capitalization, meaning the biggest companies count for more of the index – so much so that if we add up the value of the five largest companies, it tops $10 trillion (23% of the index), and the 25 largest companies in the index are worth $20 trillion, so just 5% of the index accounts for 45% of the total value.

Simply put, if they move, or even a few of them move, it appears to our eyes that the entire market is moving. Perhaps more alarming is that the same works in reverse. If a majority of components fall, and the biggest stocks rise, the index can stay put, reflecting no real move. That’s why I look at data for individual stocks. If we see big selling overall, but the biggest stocks rise, it’s an inaccurate picture.

Here’s an example of what I mean. Below we see the SPY against the Big Money Index (BMI):

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

Notice how it rises while the BMI falls. That’s because of the phenomenon of the largest stocks going up.

Now look at the BMI falling with the Russell 2000 Index tracking ETF IWM:

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

That shows a more balanced picture. Money has been moving out of stocks since mid-November, so in the last few volatile weeks, it seemed like we might finally see the SPY follow suit. For that to happen, the large stocks would have to “crack.” They started to: we saw Apple (AAPL), Tesla (TSLA), and Nvidia (NVDA) all sag indicating the correction might pick up steam. Selling was finally intensifying in all stocks. But like so many times before in the post-pandemic world, selling suddenly vanished. How do we know if the coast is clear? We did a cool study to find out. Here you’ll see the individual stock sells:

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

What visually jumps out is when you get big red stick (huge selling), markets tend to bounce right away.

MAPsignals is developing a new Oversold Stock Indicator. To show you how powerful it is, here are the stats: Looking at only stocks that big investors can easily trade, we get a universe. When 15% or more of that universe is sold, we see big juice right afterward. Look at every instance since the pandemic when that happened, and then watch the 1-day and 5-day return of the SPY:

Notice that the most recent instance was December 20th. Also notice that 86% of the time, the SPY was up materially (average +2.54%) five days later. So far, December 20th is on track for a win.

But if we only focus on the biggest S&P 500 stocks, we get a totally different view. Much like focusing on the five visible planets, excluding earth, and ignoring the possible 400 sextillion other ones. The point here is that looking at just the indexes is like wearing rose-colored glasses: You only see part of the spectrum. I prefer to see it all. Looking at how big investors mover their money gives a much clearer insight into how the stock market really moves. As Malcom Forbes said: “The best vision is insight.”

Navellier & Associates owns Nvidia Corp. (NVDA), and Apple Computer (APPL), and 1 clients owns Tesla (TSLA), per client request in managed accounts. Jason Bodner does not own Tesla (TSLA), Nvidia Corp. (NVDA), or Apple Computer (APPL), personally.

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

Please see important disclosures below.

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

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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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