by Jason Bodner

March 2, 2021

Can we know what the future holds?

That’s impossible. No one can really tell the future, right?

My wife and I were just talking about this yesterday. We debated the validity of palm readers, tarot cards and eerie coincidences. Then I remembered my wife’s own predictive powers. In 1999, we weren’t even dating yet. I was flirting with her, a native French speaker. I said I wanted a little girl to call me “Papa,” but she replied quite seriously that if we ever ended up married, we’d only have boys. We married in 2002. Our first son was born 2004. Our second son was born 2006. Our third child, a boy, was born 2011.

I learned then: Don’t fight a woman’s intuition.

That’s small-scale though. What if I told you that one of the most popular TV shows of all time has predicted the future at least 30 times?

For instance, in 2000, they predicted Donald Trump would become president. They also correctly predicted autocorrect, smart-watches, Ebola, Lady Gaga’s Superbowl performances, Superbowl winners, Nobel Prize winners, the Higgs-Boson particle, and even Siegfried and Roy’s tragic tiger mauling.

I swear. And those are just a few. See: The Simpsons has an uncanny knack for predicting the future.

So, yes it seems possible to predict the future. It seems so for stock market behavior too. Regular readers know that I correctly called market tops and bottoms several key times now. Here are just a recent few:

  • January 2018 peak
  • December 2018 trough
  • February 2020 peak
  • March 2020 trough
  • September 2020 peak
  • 2020 Election volatility
  • November 2020 rally

I recently called for a market peak the week of January 25th. It happened. Selling began to take over until a coordinated “private bailout” rescued the stock market. Hurting hedge funds were short skyrocketing stocks like GME and AMC. They had to sell winning longs to pay for bad shorts. The market started to tank, but then Robinhood saved the day. Along with other online brokers they restricted buying in these wild shorts. It gave needed relief for ailing funds. They could exit and lick their wounds instead of facing certain death. Opportunists came to buy the dip. It turns out I was right but only for a New York minute.

Navellier & Associates does not own AMC Entertainment (AMC) or GameStop (GME) in Managed accounts. Jason Bodner does not own GameStop (GME), or AMC Entertainment (AMC) personally.

I’d love to tell you I am a modern-day Nostradamus, but I’m not. I didn’t make these calls by myself. The Big Money Index (BMI) did. That’s an index measuring big professional investors buying and selling stocks in an unusual way. Simply put, when the BMI is oversold, it means “all aboard; stocks are about to rocket higher.” When overbought, while it may take a little while, it is my opinion the market should eventually fall.

When the BMI falls from overbought, we should watch out below. On Saturday, February 27, the BMI finally dipped below 80% (79.9%). It may feel like the longest ever overbought period: 58 days (starting December 2nd, 2020), but it wasn’t. That record was 84 days, last May 6th to September 2nd.

This time, the market is being dragged down by the prior leadership of technology:

MapSignals Big Money Index Chart

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

Volumes have also been exploding. There are many measures of volume, but I prefer my own measure. The BMI is made up of buying and selling signals. To make a signal, one requirement is huge volume. Many signals mean big volume. Have a look:

Huge Big Money Volumes Chart

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

Now look at how the daily average of Big Money signals for 2021, which is larger than 2020, which was marked by a sharp pandemic crash and recovery!

Outsized Big Money Volume Days Bar Chart

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

To try to predict the future, we must know what the signals themselves are doing. Nonstop big volume buying means that higher prices are likely ahead, while extreme buying usually means a pullback is close. Sustained big selling indicates lower prices are coming, while extreme selling indicates a sharp reversal is near. I need to inform you that stock selling is clearly increasing:

Big Money Stock Buys and Sells Chart

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

Zooming in:

Big Money Stock Buys and Sells Zooming In Chart

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

We also see accelerated ETF selling:

Big Money Exchange Traded Fund Buys and Sells Chart

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

Big Money Exchange Traded Fund Buys and Sells Zooming In Chart

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

Look: I hope I’m not freaking you out. My original “prediction” was for a market peak around January 25th with a falling BMI and an eventual market trough in early April. I also gave the caveat that it came from my study of 30 years of historical data. That’s what the averages told me. Those same averages led me to prior accurate predictions. But, before we get carried away worrying about the end of the world, I must tell you that this is just a normal and necessary healthy market correction.

Right now, we’re seeing a huge rotation: Last week saw selling in Utilities, Healthcare, and Staples. Tech saw distribution, but tech-stock prices are too high to breach a technical sell signal yet. By contrast, buying was in six sectors, Financials, Energy, Industrials, Discretionary, Materials and Real Estate.

MapSignals Sector Rankings Table

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

So, while money is sloshing around the market, rotating out of growth and into stocks that benefit from the re-opening of the economy, selling is picking up. What does that mean?

Below, I’ve highlighted “pink days” of more sell signals than buys since 2018. The first thing we notice is that the selling tends to clump together and last a little while. As one would guess, it also pressures the market. But we also notice that even despite a pandemic, the market bounces after selling intensifies.

That’s the good news. The bad news is that as the BMI falls from overbought, the selling has just begun:

Days of Net Selling Chart

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

Predicting the future seems possible, given the Simpsons’ crazy accuracy and the BMI’s ability to nail tops and bottoms. In the end, I don’t really try to predict; I just follow the data. Right now, the data tells me the peak is in, and we should expect some chop in the coming weeks. The prior two times the BMI fell from overbought, markets fell. It took a few weeks, but the corrections played out. My prediction was early this time, but as the data changed in the past, it took time to play out. I believe that’s the case here.

At best, it’s hard to predict the future, but we can try. The one thing to remember is that it’s not up to us. As Ralph Abernathy said: “I don’t know what the future may hold, but I know who holds the future.”

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
Bonds Offer No Real Competition to Stocks

Income Mail by Bryan Perry
Staying the Course Amid the Volatility

Growth Mail by Gary Alexander
The Case for a Rapid Economic Rebound in 2021

Global Mail by Ivan Martchev
The Fed Would Love a 2% 10-Year Treasury

Sector Spotlight by Jason Bodner
Is the Stock Market Beginning to Crack?

View Full Archive
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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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