by Jason Bodner

June 2, 2020

Our kids’ last day of virtual school was Friday here in Florida, but with no graduation ceremony.

My eldest son also finished four years of work to test for his 1st degree black belt in Tae Kwon Do. That 2,000-year-old sport is one of two Olympic martial arts. Today, over 70 million people in 188 countries practice Tae Kwon Do and four million of them are black belts. My boy is now one of those four million.

Normally, hundreds of parents crowd a high school gym for hours as kids undergo grueling testing. But this time, it was in our living room staring at a computer screen in a video test.

We had much to celebrate. I decided we should finally go out to dinner! Since the country is slowly opening and people are timidly taking steps back towards normalcy, I thought that process would be easy.

We loaded in the car and drove 40 minutes to reach our favorite spot. We specified outside seating only. There were a handful of tables free. We felt happy to order food and drink for the first time in months.

But soon after, the manager came and said, unfortunately, we’d have to leave. Protesters over George Floyd’s tragic death were moving quickly from Miami and we were the bullseye for their next protest.

We left disappointed but started calling restaurants. Then the shock came.

We called seven restaurants. None could seat a family of five until 9:30. Several were booked solid. Many were on the highway and traffic was tight. People spilled into the streets, dancing outside bars.

Apparently, the last weekend of May marked the “coming out” party everywhere. People were done with the lockdown. Like it or not, reopening is here. I bet it will happen faster than expected. When we finally got to another restaurant, it was packed. People of all ages were dining closer than expected, mask-less.

Maybe this is why stocks have been so strong since their March lows. The market always thinks forward. The local pent-up demand is suddenly exploding, and this “coming out” may soon translate nationally.

Our economic strength should at the very least deliver an uptick. People are out of work, but jobs will be needed as reignition happens. Don’t take my word alone. The data says that big stock buying is here in full force. Last week was the highest 5-day signal count since March 31st – that’s 43 trading days.

Amazingly, out of 569 signals last week, 568 were buys. Yes, there was only one sell signal last week.

The five-day stock signal average since 2012 is 548, so we’ve finally climbed back to average signal counts – and they were 99.82% buys. That’s obviously not bearish.

Buying last week was focused in Tech, Industrials, and Materials, with Discretionary, Staples, Financials, Communications, and Healthcare all seeing big buying as well, as eight of the 11 sectors saw more than 25% of their universe of stocks being bought. That’s big buying.

MapSignals Sector Ranking Table

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

What could be driving all this buying?

Someone suggested that it might be the Russell Rebalance, but the FTSE Russell 2000 Index Reconstruction actually starts June 5, according to the FTSE Russell Website.  The “Russell Rebalance” just means that the index is designed to rebalance to reflect an ever-changing market more accurately. Stocks fall in and out of the index and must be reweighted. Investors tracking indexes need to adjust their holdings, and that can have a big volume impact on markets when all that buying and selling hits the markets at once.

For now, the Russell Rebalancing hasn’t started, but starting June 5 it may drive market activity.

Still, something else is going on that no one is talking about.

The Federal Reserve is Now Buying ETFs

There was significant buying in ETFs last week. In last week’s four-day holiday-shortened trading week, we had 116 ETF signals. All but 10 were buys. While that may not seem big, let’s put it into perspective.

Since markets bottomed March 23rd, there have been a total of 55 signals – an average of 1.15 per day, so last week’s ETF trading activity of 29 per day was 25 times the average activity since March 23rd.

Average daily ETF activity breaks down like this:

  • 10-year average – 12.06 ETF signals per day
  • 15-year average – 10.08 ETF signals per day (ETFs hit their stride in popularity in 2005)
  • 30-year average – 5.29 ETF signals per day

MapSignals Big Money ETF Index Chart

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

Markets went overbought a few weeks ago. This is normal after deeply oversold markets. I recently told you that the overbought market was less about FOMO (Fear of Missing Out) and more technical. That’s because no one was trading ETFs. Now, the big money has stepped into ETFs.

My goal is finding big players buying stocks and ETFs, and there’s nobody bigger than Uncle Sam.


Top ETF Purchases Press Release Image

Big buying in ETFs is heating up. We just hit a level not seen since mid-January but, as I said earlier, big stock buying is ramping up too. Wednesday was the biggest buying day so far in 2020.

Remember my warning: Overbought periods may last for many weeks. Our data says that after being oversold, overbought markets average 20 trading days. It has only been 17 days so far. The longest time was 68 trading days – or more than 3 months. For context, here’s 30 years of the Big Money Index:

Thirty Years of Big Money Index Chart

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

In these interesting times, we wanted to celebrate after lockdown, and life quickly got complicated.

The market is rocketing in the face of an avalanche of bad news. The market “should” go down, but it’s going up. I follow the data, which says the market went overbought and seems to be staying there.

It’s confusing, but confusion shouldn’t cause inaction. Following big money cuts through the noise.

Henry Miller said: “Confusion is a word we have invented for an order which is not understood.”

The reason always comes later. We will understand, just maybe not today…

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
Why Silver Is Moving Up Faster Than Expected

Sector Spotlight by Jason Bodner
Lessons from a National “Coming Out” Weekend

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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