by Jason Bodner
March 25, 2025
A kid says to his mom: “Ma? I have some good news and bad news.”
Mom says: “Give me the bad news first.”
Kid: “I took the wrong medicine.”
Mom: “What’s the good news?”
Kid: “I’m protected from fleas and ticks for the next month!”
It’s a good thing we humans don’t need to worry too much about fleas. Although, if you get them for some reason, you should know just flicking them off doesn’t do any good. That’s because an adult flea can jump 150 times its height. That’s impressive if you imagine that an average 5’9” adult male would be able to jump from the ground to the top of the Trump World Tower (870 feet) to match the same leap.
Well, I have some good news and some bad news for you this week – and it’s not about fleas.
The good news is that we are not going oversold on the Big Money Index today, or this week, like I originally predicted. That’s also the bad news. It’s good, because (for now) it looks like the malicious selling for both stocks and ETFs has stopped abruptly, and we even see some emerging buying:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This buying is reinforced with unusual flow volumes, too. This means that whoever had to sell is done selling for now. This sudden vanishing of outflows coupled with small buying reversed the BMI free-fall:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
For further confirmation, let’s look at the flow data by market cap from the latest market peak on February 19th, through the low on March 13th, and then the market flow since the 13th:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
You can see a tale of two markets here. This reinforces the theory I proposed last week, that much of this selling was forced selling. When professional investors use leverage in an effort to beat a hot market, they can get caught flat-footed rather quickly. When stocks suddenly reverse sharply lower after a catalyst – say the threat of tariffs – investors need to take down their leverage quickly. And if they don’t, they will be forced to do so when margin calls come. And let’s not forget that margin debt balances, as reported by FINRA, reached epic all-time heights of $937 billion as of January 2025, up 33% from the year prior:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
I am highly confident that we will see a fall-off of these margin debt balances when the new statistics are updated in the coming weeks. I would also not be surprised to hear of some hedge fund blowups as this high percentage of leverage can do some nasty things to even longstanding firms.
Why use so much leverage? A look at the chart above shows a clear correlation between market prices and leverage. Money managers get paid high fees to beat the market. When a bull market runs long and strong, it is hard to beat. The incentive to leverage capital grows, but a sharp reversal can spell disaster.
It appears, at least for now, that some leverage came out of the system in the form of forced selling, which heavily pressured stock prices. This action has also caused a major realignment of sector strengths and weaknesses. As investors rushed out of growth sectors, they clamored for safety in defensive sectors. This pushed Utilities and Staples up in rank, while growth sectors plummeted, like technology and discretionary:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When we monitor inflows and outflows at the sector level in these 11 charts each week, we notice that Utilities and Real Estate saw inflows. Technology, Discretionary and Industrials saw outflows:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
So, the good news this week is that I was wrong last week! The market may not go oversold in the near-term. That averts the pain of a market free-fall. The bad news is that bargains won’t fall from the sky like they do during an oversold market. In investing, cheap stocks often masquerade as the apocalypse.
You know it’s true. I can’t count how many times I have heard: “I wish I had more money to buy during the Financial Crisis.” The same applies to the COVID-19 crash. It is a cycle that happens over and over again. Just look at this random list of some of the major and minor market crashes in history:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
And just since 2010, we’ve seen great profits from buying into false panic fears. This is a graphic from 2022, but it still rings true, with awesome returns whenever CNBC airs a “Markets in Turmoil” special.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
So, a part of me was rooting for an oversold market this week or next. That’s because an oversold condition holds the key to huge asymmetrical payoffs to the upside. In other words, big scary sell-offs bring the best opportunities for buying good stocks at outrageously low prices.
While we may not get to oversold conditions this week, or next month, there is still a possibility that selling picks up again. For now, though, I think the odds are high that the low is in, so this is a great time to pick up great stocks. Remember, though, that when stocks are “cheap” it’s because no one wants them.
That means we are still betting against the crowd. Mentally, that can be tough. I still want to own NVDA, even when it is falling. (I have not sold my NVDA). In other words, going with the crowd when it is confident feels natural, but when a correction comes, it is easy to get on board the fear train.
But 150 years of rising stock prices show why fear can be expensive:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
I am betting on this 150-year trend. The long-term investor should, too. Focus on tomorrow’s promise while extracting the most today. Be ready with a list of targeted purchases if you have cash to deploy.
Confucius said: “Patience attracts happiness; it brings near that which is far.”
Navellier & Associates; own Nvidia Corp (NVDA), in managed accounts. Jason Bodner owns Nvidia Corp (NVDA), personally.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The “Dot Plot Thickens” at the Latest FOMC Meeting
Income Mail by Bryan Perry
There is a Major Disconnect Between Current Perception and Reality
Growth Mail by Gary Alexander
Is This a Mini-Correction or the Start of a Lost Decade?
Global Mail by Ivan Martchev
Some Bottoming Action in the Stock Market is Clearly Evident
Sector Spotlight by Jason Bodner
Some Good News and Bad News About This Correction
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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