by Jason Bodner
March 31, 2026
People are always looking for confirmation. We trust online ratings before buying a $2-product. We notice what cars others drive. We feel stronger when we move with the crowd. It’s part of our basic wiring.
In the famous conformity experiments by Solomon Asch, people knowingly gave wrong answers to simple questions just to match the group. At times, over 70% conformed to a knowingly wrong answer at least once – proof that people will ignore what they clearly see – just to stay aligned with the crowd.
That same instinct carries into the stock market and the world of investing. Most investors aren’t driven by conviction. They’re driven by comfort zones. They want an excuse to act, or an excuse to do nothing.
When markets drift higher, everything feels fine. Money flows automatically into 401(k)s as people buy on schedule, without thought. That steady participation smooths things out. It’s the market’s default state.
But when volatility returns, mass psychology shifts. As stocks run higher, investors feel rising pressure to act. In rising markets, the fear of missing out (FOMO) creeps in. Prices feel expensive, but people still want to buy now, because everyone else is making money. That’s usually when the buying risk is highest.
On the down-side, when markets fall hard, fear takes over. Investors start asking how much worse it can get. They worry about losing years of savings. The instinct is to pull back, to head for the exits.
History shows those are often the worst moments to sell – and the best moments to buy.
But here’s the reality: Most investors don’t do either one. They don’t buy near the top, and they don’t sell near the bottom. They don’t act in between, either. They stay put – because that’s where the crowd is.
I call his “the neighbor test.” When markets are hot, my neighbors ask me if they should buy stock names that have already run higher. They feel late, uneasy, but still tempted. Most of the time, they don’t act.
When markets are falling, they ask me how bad it will get. I ask them one thing: Did you sell anything?
The answer is almost invariably “no.”
So, if most people aren’t actually trading on fear or greed, what’s driving these big day-to-day moves?
It’s the professionals! Money managers, hedge funds and big traders are moving stocks. They act because their job is to outperform market benchmarks. They tend to push prices higher, then sell into strength. They also drive prices lower, then buy them back from weak hands. Algorithms amplify these swings.
Meanwhile, the steady inflows from everyday investors act like ballast, stabilizing the market. When that flow slows during periods of fear, volatility rises. Without that constant bid, prices move more violently.
This volatility feeds emotion. And emotion feeds the narrative.
One-week, we see AI disruption crushing software. The next week, it’s geopolitics. Then it’s oil, inflation, or recession fears. The headlines shift, but the effect is the same. Sentiment drops, and stocks follow.
Now we’re back in that environment. Stocks are falling again, so confidence is fading.
But context matters. When everything feels chaotic, I step back and let the data do the talking. First, this is a mid-term election year, historically the weakest year in the four-year cycle. Volatility is not unusual.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
In mid-term election years, Quarters 2 and 3 are typically the weakest. Then, the fourth-quarter surges:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
At 44%, the Big Money Index (BMI) reflects this change. It is falling and now sits at its lowest level since last April’s “Liberation Day” sell-off. On April 8, 2025, the BMI bottomed at 35.4%. Based on the current pace, we could revisit that level as early as this Friday, but more likely next week, April 6 to 10.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
At 35%, the market would be getting oversold. At 25%, it would be extremely oversold. That 25% level is rare, showing up just 23-times in the last 36-years, or about once every19-months. The last instance was in October 2023, nearly 29-months ago. By that measure alone, we are overdue to become oversold.
Our data suggests that kind of extreme (BMI at 25%) could arrive on or around April 22.
Here is what history says: After lows near 35%, about 57% of outcomes are positive, but the bottom is not always set immediately. From one-month forward, results improve. One-year later, 87% of historic cases are higher, with a median gain of 18%. Two-years out, the median return climbs into the mid-30% range.
At a 25% BMI or below (extremely oversold), the signal sharpens. Even one-week out, nearly 70% of past outcomes are positive. Six-months later, returns are materially stronger than at the 35% level. Two-years out, roughly 86% of cases are higher, with similar long-term gains but much cleaner entry-points.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The key difference is timing. The 35% level can come early in a draw-down, while the 25% level tends to align much closer to the actual bottom. Here is what a few recent extreme oversold instances look like:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Just in case I am not being clear enough, every gold and green-dot below marks a moment the BMI hit oversold: In the dot-com bust (2000), Great Financial Crisis (2008), COVID (2020), 2022, October 2023.
Every single one sits below where the market was a year later. The inset shows the forward returns.
The headline below says it all: “When the BMI hits oversold, history says buy.”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The take-away is simple. If the BMI hits 35%, start building some positions and expect some volatility. If it pushes toward 25%, history suggests you buy more. But this would also be a time when markets feel the worst. When the headlines are loudest, when volatility spikes, when everything pushes you toward selling, that is often when opportunity is forming. We are in such a cycle now.
The data points to a window between early April and April 22, with the latter lining up as a potential low.
It will feel wrong to buy into such a market, but if this is wrong, I don’t want to be right.
Look at broad exposure through the SPDR S&P 500 ETF Trust, Invesco QQQ Trust, or iShares Russell 2000 ETF. Or focus on high quality companies with strong fundamentals but where prices are down.
The crowd will always react, when discipline matters most. Our edge comes from not being emotional.
“Markets reward discipline, not emotion. The time of maximum pessimism is the best time to buy.”
— John Templeton
Wise Words!
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Outlook for the Energy Sector in April
Income Mail by Bryan Perry
What’s Working, When the Market Is Not?
Growth Mail by Gary Alexander
When Spring Feels Like More Winter
Global Mail by Ivan Martchev
One Cannot Print (or Tweet) Crude Oil
Sector Spotlight by Jason Bodner
Never Underestimate the Power of the Crowd
View Full Archive
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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 and 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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