by Jason Bodner

May 27, 2020

Simple stuff gets confusing sometimes. For instance, according to the national league of cities, the most common street name in the U.S. is Second Street. First Street is the third most common street name. Third Street is the second most common, while Fifth Street is the sixth most common.

Who’s on first?

The stock market is also confusing a lot of people right now. It seems simple: The news is bad, across the board. There’s a pandemic for the first time in generations, people are dying, and the economy has taken a beating for the ages. There’s also bitter political infighting. Stocks should go down right? But they’re not. They’ve recovered most of their March slide in what turned out to be the shortest bear market in history.

Bear Market Bull Low to Bull Market Entry Timeline Image

“But how can that be?!”

“It just doesn’t make sense!”

“It’s a head fake before we drop another 50%!”

These are just some of the comments I’ve heard, but the fact remains that stocks surged mightily in three days. The definition of a “bull market entry” after a “bear market low” is a 20% recovery from the market low, and the Dow Jones Industrial Average rallied 21.3% from Monday, March 23 to Thursday, March 26 – just three days – the quickest bear market low to a bull market entry on record, as tracked by Dow Jones Market Data Group – a monster rally. You know what that means? It means sad bears:

Sad Bears Image

In the last two months, the major U.S. stock indexes gained between 31.6% (Dow) and 35.9% (Nasdaq), averaging +33.7% from the depths of despair and uncertainty on March 23rd (upper right box, below):

Major United States Stock Indices Performance Table

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

Turning to the 11 S&P sectors, here are the sector index performances since 3/23, sorted high to low:

Standard and Poor's 500 Sector Performance Table

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

On the top of the list, energy rose almost 60%, but rising from extreme lows. Materials and Discretionary stocks are the next best performers. I have talked a lot about Health and Tech stocks leading the buying out of the depths, but the biggest bounce back came from one of the weakest groups: Energy.

The way I rank sectors for technical and fundamental strength shows Energy way down near the bottom:

Sector Strength/Weakness Table

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

We can see from this table that growth sectors topped value, with leadership in Tech and Health Care.

Looking at these two charts may make you feel like you’re at the intersection of the 6th and 2nd most common street names, near the intersection of 1st and 3rd but neither 5th and 3rd nor 2nd and 1st intersect.

Memolition Direction Image

As I’ve explained in the past, I gave up on the futility of trying to constantly justify and explain market actions. Things happen in life all the time that defy explanation. Even more often, we just have to deal with them and adapt. Can you think of a better example than a global coronavirus pandemic arriving just after an impeachment and forcing hundreds of millions to stay locked in their homes for months?

What’s more important – trying to figure out why, or figuring out how to adapt to the new environment?

That is what investing is all about. Too much time and energy is unnecessarily wasted trying to fit events into nice little shiny boxes. Here’s the reality: Sometimes they fit, sometimes they don’t. In my opinion, having fluidity and flexibility will yield not only better results, but a more peaceful and harmonious life.

Don’t fight the tide, and don’t fight the tape. Just go with the flow.

When the Big Money Index (BMI) went oversold, I knew it was time to buy stocks. Extremes don’t last forever, especially when oversold. Things look a little different on the other side. Now that the BMI is heavily overbought, the main difference is that it can stay that way for a while. I wrote last week that the longest overbought period in the past 30 years was over three months (93 calendar days, 65 trading days).

We have now been overbought for 13 trading days. It could last much longer, or it could end tomorrow. The 30-year average says to expect overbought to end after 20 trading days – or another week and a half.

No one knows. What is paramount is to have a plan.

When oversold, it’s best not to sell. It’s best to have cash and buy when others freak out. Naturally, the process of raising cash is dynamic with markets dictating when to begin and how to deploy.

When overbought, it’s best to sit on your longs and let the boats rise with the tide. Overbought markets are not the time to add stocks. But if you must, look for outliers, the ones with the best fundamentals and strong technical support. They tend to be the most resilient after inevitable market pullbacks.

The market is in a bit of a confusing spot right now. News and fundamentals say, “Stay away.” Technicals and price performance say, “All aboard.” Leadership is both logical and confusing. We are overbought, which would incline one to sell, but it could last a while longer.  The market is giving us a bonus round with which we could potentially rack up huge gains while we wait for a turn. Or it could turn tomorrow.

The market doesn’t have to make sense. We just need to be able to adapt as the environment changes.

Standing on a corner explaining to everyone why it should be sunny today doesn’t shield you from the rain, no matter the logic or facts you put forth. If it rains, you’ll get wet.

The bears got it right for a few days. They will get it right again, but the data says, “Not now.” The data says the buyers are in control and might keep it for a while. The market is due for a pullback, but I won’t know when that day arrives until the data shifts and says the selling has begun to increase.

Now, we must simply adapt. Lockdown forced us to stay at home. Reopening is beginning, whether we agree or not. A lot of energy and time will be spent debating the subject. But the transition is coming. It feels good to have explanations for everything, but we all know it’s impossible to explain everything.

That’s not to say there is no reason. The reason always comes, just not always as soon as we want it to.

“When it is all finished, you will discover it was never random.” – Unknown.

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 Year of the Bat

Sector Spotlight by Jason Bodner
Record-Fast Recovery Makes for Restless Bears

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

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 or by requesting a copy by emailing 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.