by Jason Bodner

April 6, 2021

Humans have thought about fast money ever since money was invented. Even the most conservative types dream of a sudden windfall. Take me: I know I have better odds of getting bitten by a shark than hitting a mega-million-dollar jackpot, but I still buy a ticket or two when the jackpot hits a billion dollars.

As they say, “You’ve got to be in it to win it!”

So, it makes sense that when the stock market doesn’t do what we want it to do, we get impatient. That often turns to frustration, which leads to impulse… then, we often do the wrong thing at the wrong time.

Recently stocks have been frustrating: Those we want to rise don’t, and ones we think shouldn’t go up do.

So what do we do now? My answer is always the same: Look at the data. I learned the hard way that my emotions are my single worst investing indicator. When I traded by my gut, I blew my cash faster than it takes for the car behind me to honk at a green light, so I only use unemotional numbers for now.

Let’s start with the indexes. Growth had a great four-day week last week despite it being a low-volume week. Looking at the S&P indexes, growth surged 2.3% while value didn’t budge.

Since March 1st, the Dow Jones soared +5.1%, followed by the S&P 500, at just over +3%. Growth and tech were less impressive. The NASDAQ Comp was down -0.8% and the Russell 2000 was down -0.94%. But digging under the hood, we see the Russell 2000 Growth index fell -4.84%. The spread of the Dow Jones against the Russell 2k growth index since March 1 is just about 10%.

Market Sector Indices Tables

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

I’ve often written here that the hidden Big Money story can be different than the surface story, so now that you’ve seen the divergence of the various index averages, let’s look at the Big Money.

Because last week was a low-volume week, there wasn’t much of a story in the latest data other than this: Big Money signals are back to their “average” levels. Below, we see that the number of stocks making a daily “signal” (a stock trading in an abnormal way) came back to the 5-year daily average of 572.

The light blue bars below the S&P 500 show huge signal counts during the pandemic plummet March of 2020. Then, as buying exploded since the election, signal counts surged. Last week they came back to average. (The one-year average is 601 stock signals per day. Last week’s daily average was 581.)

Big Money Signals over Five Years Chart

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

So, volumes are cooling a bit while volatility is heating. That sounds about right. We are in between earnings seasons, and what was once an overheated market is in the late-stage cooling-off process.

Now let’s look at what has been leading and lagging versus last year. Q1 was strong for stocks. The SPY (S&P 500 ETF) rose 7.5%, but where was most of the Big Money going? The sector attracting the most buying in the first quarter was the Financials, the king sector in terms of Big Money buying:

Big Money Sector Buy Signals Bar Chart

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

That’s interesting. But there’s another hidden story. Let’s not only look at signal counts, but at which sector is showing the fastest velocity of Big Money activity. Without getting too deep into the weeds, this means we measured all buys and sells per sector, and then divided by the number of stocks available in that sector. Some sectors have way more stocks than others. For example, in my universe, Tech has 275 stocks while energy has 86. So, just looking at total numbers doesn’t tell the full story.

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
How a “Family” Hedge Fund Hurt Many Big Banks

Income Mail by Bryan Perry
Income Mail is on Hiatus

Growth Mail by Gary Alexander
April Looks Promising, But What About the Rest of 2021?

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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