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
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

Important Disclosures:

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 www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. 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.