by Jason Bodner

April 25, 2023

Opinions make us human. We spend endless time debating differing views. Having an opinion is easy. Voicing it well is hard. And then standing behind it in the face of vast disagreement is incredibly tough.

Take Graham Hancock’s work, for instance. This controversial figure (born 1950) has some radical opinions about the origins of humanity. He believes there was a lost civilization possessing advanced technological, astronomical, and even potentially telepathic skills that our current civilization has long forgotten. He believes ancient structures were incorrectly dated by archeologists – off by thousands or even tens of thousands of years. He was ridiculed, insulted, written off, and discredited since the 1980’s.

It must have been difficult to stick to his beliefs when he was publicly shamed. But it turns out he may be right… or at least the doors that were once closed to him have cracked open. Things really began to turn for him when a megalithic structure was unearthed in Turkey called Göbekli Tepe. Some call it the world’s first temple. Archeologists have unanimously agreed for decades that modern civilization began 6,000 years ago, but Göbekli Tepe has been undisputedly dated to 9,500 BCE, roughly 11,525 years ago.

Popular opinion may win you friends and influence. Unpopular opinion, however, may turn out to be right… much later on. It may also shift paradigms for a long time. I say this because I have had a bullish view since the fall of 2022. That view was – and in many ways still is – very unpopular. But I gave up on popularity contests long ago. High school convinced me that popularity is short-lived and of limited benefit. Those who pave new paths tend to travel alone for a long while until they are proven right.

In late September, I called for a significant rally, or a “Big Lift”. This was not prophetic. It was based on data analysis. All the data pointed to a media focused on negativity and not seeing the forest through the trees. Back then, we put forth a pile of evidence that suggested that stocks would rally, including:

    1 )  The Big Money Index (BMI) had gone oversold, forecasting higher prices:

Big Money Index Chart

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

2 )  Seasonality and mid-term election years pointed to an upside:

Map Signals S&P500Table

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

    3 )  Buying and selling data for both stocks and ETFs suggested prices were headed higher:

Big Money Stock Buys-Sells Chart

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

    4 )  Least popular of all, I suggested that tech stocks, with a focus on semiconductors and software, would lead the way. I suggested that investors looking for value might look to growth stocks.

Six Months Later – How Did Those Predictions Work Out?

I was told in not-so-many words that I was nuts: I was ignoring the facts. I didn’t understand the severity of the economic situation. Well, let’s move forward six months and see what happened:

    1 )  Major indexes rallied significantly, roughly 15%:
    • a.   Dow Jones +15.7%
    • b.   NASDAQ + 15.6%
    • c.   S&P 500 + 15.3%
    2 )  The Information Technology Sector Index rallied an eye-popping +26.3%. The NASDAQ 100 rallied +20.3%. And the PHLX Semis index rocketed 37.2%.
    3 )  Russell Growth (c. 14%) outperformed Russell Value (averaging under 9%) significantly.

I’ve highlighted the above in the performance table below:

Performance Table

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

They say it’s better to be lucky than smart. I say I’d rather be unpopular and right than popular and wrong. But, again, just to stress this: It wasn’t my opinion. That view was born from data and cultivated from the analysis of what the data said, so today’s question is: What is the data saying now?

    • 1 )  The data says markets should continue marching higher – at least for a little while. First and foremost, the Big Money Index is on the rise. Consulting the BMI chart above, we can see it went within a kiss of being oversold in March, and has been rising ever since.
    • 2 )  Selling has evaporated and the stage is set for buying to potentially take control. For clarity, that hasn’t happened decisively yet, but seeing more buying than selling is definitely a good sign:

Big Money Stock Buys-Sells Chart 2

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

    3 )  Sector leadership is still in the strength areas I forecast in the fall of 2022. Tech and discretionary remain in the top positions while financials, communications, and real estate bring up the rear:

Sector Rank Table

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

    4 )  If we look at individual sectors, we see strength returning to previously weak areas. Here I’d like to focus on the “middle” sectors. As I mentioned before, tech and discretionary remain strong:

Discretionary vs XLY Technology vs XLK

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

But look at how selling ripped through some sectors only to give way to new strength. We see that in industrials, materials, energy, staples, health care, and utilities:

Industrials vs XLI Materials vs XLB

Energy vs XLE Staples vs XLP

Health Care vs XLV Utilities vs XLU

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

This is crucial because if we want a strong bull market, we can’t just have it in two sectors. We need other weakened areas to firm up, and that’s what we have seen here. Heck, even in the scarier sectors like financials, communications, and real estate we see signs of vanishing selling and small chutes of buying:

Financials vs XLF Communications vs XLC

Real Estate vs XLRE

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

    5 )  Perhaps the macro situation isn’t as cataclysmic as the headlines want us to believe the past few months. It’s telling in the following chart that the Fed Funds Effective rate is nearly at parity with inflation (all items). The last time it was this close was almost exactly three years ago:

FED Fund chart

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

    6 )  Lastly, earnings season is upon us. Early indications show that earnings are working. According to the FactSet Earnings Insight (which admittedly was last updated 4/14/23) 90% of S&P 500 companies beat EPS surprise and 63% beat revenue estimates. Earnings are declining, as expected. That said, large bank earnings were good. And as I write this, more than half the 83 companies reporting to this point are beating earnings estimates.

The short story is that there is a lot to be positive about. As earnings continue to emerge and inflation continues to fall, the data points to more upside.

Opinions may not be popular, but that doesn’t mean they are wrong. Perhaps William Penn thought so when he said: “Avoid popularity; it has many snares, and no real benefit.”

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
The Stock Market Has Reached a Fork in the Road

Sector Spotlight by Jason Bodner
Opinions are Cheap – Accurate Data Is Priceless

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

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