by Jason Bodner

September 1, 2020

Mom called me.

“How are you feeling, honey?”

Politely lying, I said, “Fine.”

“You don’t sound fine.”

I opened up and told her I was stressed. Basically, I told her, “I hit some roadblocks, both personal and business. Family issues are flaring up, all the uncertainties are getting to me, and this whole COVID thing is just wearing me down… I feel like a vice is tightening,” I said, exasperated.

“So, what’s your favorite color?” she asked.

“Huh? Why?”

“Your favorite color?”

“Ocean turquoise,” I said.

We hung up. A few days later she called to ask me how I was: “Are you feeling better? You should be.”

“Funny enough, I am! The roadblock opened, the personal issues calmed down, and the vice is loosening.”

“I knew it!” she said: “I repotted your plant.”

That calls for an explanation. Forty-five and a half years ago, I was born in North Miami General Hospital. Someone gave my mom a plant that day, and by some horticultural miracle, it’s still alive today. Oddly enough, my mom swears that whenever I get sick, it loses some leaves, and when I am thriving, it gets lush again. She’s made these observations for literally my entire life. The day she called me, she noticed my plant – which she un-ironically named Jason – was suffering. “The roots were compacted,” she told me. That’s why she asked me my favorite color, so she could buy a new roomy pot for Jason to live in.

She proudly sent me a picture of Jason in his new home. This is the same plant that arrived in the hospital room the day I was born. She said: “You’re even blooming a new flower, if you look carefully…”

Potted Plant

Don’t get me wrong. I consider myself a man of science. I need hard evidence. That gives me conviction in my decisions. But even scientists know there is vastly more about the universe than we can now see.

Therefore, I may have to concede that there is something to this anecdotal connection between me and my “plant self.” If not scientifically explainable, then the link exists by some other means I do not understand.

I’ll just say it appears we are connected. Maybe this plant dictates to me more than I dictate to the plant.

The analytical side of me says it’s likely just a coincidence, but maybe the real explanation is beyond my grasp, because I just don’t know how to explain the link, if any. But what I do know is that when it comes to stocks, I see a deep connection that most investors don’t see. I see this link because I spent decades studying it. I got my hands dirty – in the soil. I read countless books, I fiddled with equations, and I built algorithms. Just like me and the Plant “Jason,” the stock market has an unnoticed alter ego… Big Money.

Market news always focuses on the major averages. If you only see the headlines – or you catch a market update in a news minute – you’ll get the Dow Jones Industrials first, then maybe the S&P 500 or Nasdaq.

The Dow is an ancient throwback from a different time, when 30 big stocks were a great representation of the market as a whole. Now, it’s much more logical to look at the 500 stocks in the S&P than just 30, but the Dow still often gets top billing. Even so, when the market surges or falls, news stories have only a few seconds to ascribe a reason. Usually it’s a cause like: “coronavirus vaccine progress” or “trade deal talks.”

But clues from the roots of the “market plant” are actually out there for the reading, just under the surface. The reasons usually have nothing to do with the outside world. The reason is one thing only: Big Money.

Recently, market strength has renewed its vigor. I have noticed my own accounts gently drifting higher in recent days after what seemed like weeks of hovering near break-even, just shy of the pre-COVID highs.

In recent days, my accounts have surged to new highs, along with the indexes. That may feel confusing because I’ve told you recently that this has been the longest overbought period in our 30 data-gathering history. You may wonder, “Isn’t this a good time to sell?” As the BMI drifts lower, it might seem logical that you can get in front of a big move down – because the market must pull back at some point, right?

Russell 2000

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

The answer is – Yes, it must, but it mustn’t do so tomorrow, next week, or even next month. The answer lies in what Big Money is doing. And despite a falling BMI, my data indicates that buying is starting to pick up again. If that happens with no accompanying selling, then the BMI will start to go higher again.

Remember, the BMI is a 25-day moving average of buy signals versus sell signals. If selling evaporates and buying surges, the BMI will start to rise. From the following chart of 2020, it’s clear there has been hardly any selling since April. And hard as it may be to see, the green bars at the right are increasing.

Mapsignals Big Money Stock Signals

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

And what is Big Money buying now? Previously, I have noted that Tech and Healthcare were the engine of the rally, but then they took a break. Well now, Tech is coming back. Last week we saw a huge inflow into Software stocks and other Big-Tech names. But the big winner this past week was Discretionary: 44% of that sector’s stocks (that I track) saw buy signals. That’s a lot. As we draw closer to the promise of a vaccine and a return to normal life, travel stocks, and “real-world” stocks are getting some attention again after being written off for dead in March. Staples and Industrials also saw notable buying.

Mapsignals Sector Rankings

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

Bottom line, the BMI may be falling, but that doesn’t mean the market will fall next week. Just as “Plant Jason” was telling mom – “I need more space,” Big Money is saying, “I want more stocks.”

The real reason for a market’s moves are not described on TV; they’re within the market itself.

My mom made the same point clear when she taught me to drive: “Never mess with a bus or a truck.”

It’s simple: Don’t fight Big Money – the buses and trucks on the market highway. Follow the Big Money.

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

Please see important disclosures below.

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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