by Jason Bodner

February 14, 2023

If you’re stressed watching the market, you may want to hold a loved one’s hand, because studies show there are health benefits from holding hands with someone you love, including the reduction of stress and anxiety. Holding hands releases oxytocin, a hormone associated with feelings of love, trust, and comfort.

You should do that – especially today. You could also relieve tension by looking at historical data to have a framework for what the market’s next move might be. I would do both, since what the data says now shouldn’t stress us! As I’m about to show you, the data is telling us something that on the surface sounds concerning, but digging deeper may leave you feeling like you are holding hands with a loved one.

First, we need to discuss the Big Money Index (BMI). It has officially gone “overbought.” As you can see below, when the amber line rises above 80, that indicates an unsustainable level of buying:

BMI Index Chart

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

Let me repeat something important: This does not mean the market is about to crash. Many people upon hearing “overbought” become concerned, thinking stocks might sink immediately. This may happen sometimes, but as you’ll see, history tells us that, most of the time, we go higher before stocks drop.

To quantify that statement, I wanted to research what an ‘overbought’ market looked like in the past and what it might mean for a portfolio from the first day of overbought, so I will summarize my findings here.

The first thing you should know is that an overbought BMI is a relatively rare occurrence. Our data set begins January 1, 1990. That now spans 8,316 trading days. The BMI has been overbought on 1,581 of those days – or 19% of the time – in 70 instances prior to the latest instance (February 8th last week).

Once the BMI went overbought in those 70 instances, I wanted to know:

  • How long will it last, on average?
  • How many days does it take for the market to peak after the first overbought day?
  • Does the market continue to go higher, or does it fall right away?
  • Where does the market sit relative to that peak on the final day of overbought?
  • And what do markets look like after we go overbought over various time periods?

You’ll be glad to know I have all the answers to those questions.

They are in this table (which may be difficult to read, so I will summarize it for you, below):


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

Summary findings:

  • The average overbought period lasts 22 to 23 trading days, or about a month.
  • It took 16 days on average until the S&P 500 finally peaked.
  • There was an average gain of +3.1% more after the first day it was overbought.
  • Once the market peaked, it took on average six days until the last day overbought.
  • The market fell an average of 1.8% from the peak to the last overbought day.

Here is a list of those findings in one line:

BMI Overbought Table

Well, that’s not so bad. But what about long after the market hits overbought? While you may expect a disaster, it’s nothing of the sort. The S&P 500 was positive – on average after 1, 3, 6, 9, and 12 months:

S&P 500 Table

I can tell you from experience that these returns are far less exciting then when markets go oversold. That story is for a different day. For now, the takeaway is clear: There is no need to fear an overbought market.

In 2022, the equity markets experienced a lot of negativity, but as investors bought stocks – in the fourth quarter – it didn’t take too much to generate new buy signals. As I’ve recently highlighted – if we wish to see where the buying has been – it’s been everywhere. Look at these sector charts to see the evidence:

Discretionary vs XLY Staples vs XLP

Energy vs XLE Financials vs XLF

Health Care vs XLV Industrials vs XLI

Materials vs XLB Real Estate vs XLRE

Technology vs XLK Comm vs XLC

Utilities vs XLU

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

The buying last week has also been focused in small and mid-cap stocks, as it has been so far this year:

Market Cap Chart

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

It is also interesting to see how the sector rankings are shaking up so far this year. Energy was #1 for nearly all of 2022, but this year so far, tech and discretionary rule the roost:

Sector Rank Table

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

It is constructive for markets to see areas traditionally associated with growth being bought up. It may be part of a massive short covering rally. It may be a quant-quake or whatever the media is tag-lining it. But it doesn’t entirely matter what the cause. If it was short covering – that sparks real buying as FOMO kicks in for bargain hunters. This then cascades into indexers needing to keep up by – you guessed it – buying.

The pace of buying is the topic here. The BMI says the pace is unsustainable. But 33 years of history says that, based on averages, we still have possibly weeks to go before we leave overbought territory. History also shows (in the chart above) several instances of the market being only one day overbought.

What happens is anyone’s guess. Thus far February has been shakier than the strong start to the year. Either way, history also tells us that even if we face some choppy waters in the upcoming weeks, markets on average are higher 1, 3, 6, 9 and 12 months after the first day of overbought.

So, caveat emptor (buyer beware). Buying stocks into an overbought BMI may not kill you, but just know that an overbought BMI simply says that the buying pace can’t continue like this forever. The average is 23 days, with 16 days until we peak at about +3% higher. That puts us around March 10th.

We’ll see. After Super Bowl #57, why not close with a championship football coach’s wisdom?

“The key to winning is poise under stress.” – Paul Brown

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
The Fed Does Not Need to “Do More”

Sector Spotlight by Jason Bodner
A Valentine’s Day Market Tip

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.

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at or by requesting a copy by emailing All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.