by Jason Bodner

April 21, 2020

A few years ago, I was in a San Francisco airport gatehouse. My flight home was delayed by three hours. I figured I’d just work, but the room was loud and distracting. I got out my trusty headphones and put on my usual jazz, but the music was so quiet, I could still hear the crowd. Since I needed to program a data analysis tool, I searched for “music to work to” and found a two-hour continuous mix of canned music.

I figured what the heck?

A 4-on-the-floor bass drum relentlessly thumped its way into my brain. After 10 seconds I thought: no way – this is too distracting. But then my mind released and got lost in the monotony of the music. What I thought would take six hours took a quarter of that. An hour and a half later, I was done with my work.

Even today, when I need to program or work with data and must tune out the world, I tune into hours of Deadmau5 progressive club music at 128 beats per minute. It works, but how?

Deadmau5 Group Image

A 2013 paper from the journal Impulse offers clues: In short, the findings indicate that genre preference and artificially modified tempo affect alpha and beta wave activation. A 2014 article in Sonicscoop (“The Resonant Human: The Science of How Tempo Affects Us”) says music synchronization can improve efficiency and mood. Humans tend to have a natural base frequency of 120 beats-per-minute (bpm).

Isolated experiments that asked participants to tap their fingers, walk, or applaud at their own tempo, showed participants moving naturally at a tempo of around 120 bpm.

The Deadmau5 mix is recorded 128 bpm, which breaks down into a nice mathematical grid each minute. 128 divided by four beats per measure is 32 bars per minute, with 32 bars being a standard tune form.

The mechanics and math of music help us focus because they allow our brains to block out noise.

Wouldn’t it be great if there was something that did that for the stock market?

For me, the answer is data. Hard numbers are my Deadmau5 mix tape for stocks. It snaps the market into focus, filters out the emotion and unnecessary media chaos. And when we focus on the data, we find it’s been very accurate, timely and helpful for those who can tune out the noise and listen to it.

Each week, I write about what the data says. I go into sectors, trends, and, most importantly, the big money buying and selling. I quote the Big Money Index (BMI), which tells us when the markets are overbought and oversold. That market timing indicator helps us figure out when to add or remove risk.

This week, I want to take a look back and see how this data mapped out the bear market last month.

The following chart says it all. It may look jumbled but simply follow along in time and look at each dot as it comes to you. The associated comment box will tell you the date of publication, the close of the S&P 500 on that date, and a quick synopsis of what was said in that issue of MarketMail’s Sector Spotlight.

Mapping the Bear Market Image

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

The chart shows you a real-time accurate model of market events yet-to-come, courtesy of tuning out the news and focusing on the data. Please feel free to check all the back issues of my column. Check up on my work. It’s available on this Web site. In short, the data told us:

  • When the market became overbought
  • When the market was due for a pullback
  • When to have cash ready
  • When it would go oversold
  • When it would trough (off by a single trading day: Friday the 20th Monday the 23rd)
  • When to buy
  • When to expect a rise

At the risk of looking like I’m spraining my arm patting myself on the back, the point here is that an accurate picture of the future potentially lies in proper analysis of past data.

What’s the data saying now?

Tech and Health Care are the New Leaders

The BMI is rising rapidly. This is due in part to the utter lack of daily big money buy or sell signals. After drastic washouts like we’ve seen in recent weeks, time must pass in order for signal counts to normalize.

As market volatility continues to calm and settle into a base, new leadership will emerge. Sector leaders, according to my data, show us that Tech and Health Care are king. This encompasses big buying and strong fundamentals. This makes sense with telecommuting and cloud computing in sudden heavy demand. Couple this with big consumer demand for “home” stocks, like home streaming services for entertainment and exercise. A major surge in demand for streaming means even more of a need to accelerate 5G as internet usage gets clogged countrywide.

Health stocks are seeing a big lift as the medical community is overloaded with care requirements and optimism for possible treatments and vaccination for COVID-19. That is evidenced by Friday’s market surge on positive news on that front.

Sector Strength Weakness Table

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

Financials and Energy remain at the bottom of the barrel. Low rates and debt exposure weigh on Financials, while for energy, all we need to know is the low price of oil:

Standard and Poor's 500 GSCI Crude Oil ETN Chart

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

Since this is earnings season, sector rotations are underway. The economic horizon is hazy at best and the pandemic is still front and center. That said, stocks are rebounding, swiftly pricing in economic recovery.

Here’s a closing quote that you can live by: “Time will tell, but data will tell sooner.” – Me.

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
Crude Oil at $18 Highlights Global Deflationary Threat

Income Mail by Bryan Perry
Reality Check for the Stock Market

Growth Mail by Gary Alexander
“Growth” is Suddenly a Dirty Word

Global Mail by Ivan Martchev
One for the Record Books

Sector Spotlight by Jason Bodner
Tuning Out the Noise in Favor of the Data

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

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