by Jason Bodner

June 25, 2024

I analyze stocks by using unemotional data to guide me. It’s been very accurate and fruitful for 25 years.

By “data,” you may assume I’m surrounded by a sea of statistics. Just Google “trader” and look at the images: multiple screens, numbers, lines, blips, red, green, anxious faces…and a ton of nervous energy. 

Wall Street has conditioned us to focus on every tick of every stock and every word of every pundit about that stock. We’ve been suckered into endless over-stimulation: a rush of daily drama, impossible to escape.

Stress is addictive. A stressed brain releases cortisol and dopamine, which encourages repeat behaviors by rewarding the brain’s pleasure center. The financial media knows this and relies on it. Their main rule is the consumer must always stay engaged.

Well, I’m breaking that rule by telling you: It’s not only OK to break away for a while… it’s essential.

I just broke away from the rat race for two weeks. I checked stocks max once a day; some days not at all. My daily intake plummeted. No CNBC. No news alerts. No serious reporters with late-breaking news.

It was awesome… I simply enjoyed the moment-to-moment joys of a family vacation in Spain and Portugal – two fairly relaxed nations that helped limit my distractions to the bare minimum.

I not only survived… I thrived. It felt great, like most well-selected vacation spots generally do.

But that’s only half the story. Long ago, I left the news and emotional drama far behind, not just on vacations, but also on a normal workday. I prefer slower thinking. It helps me avoid the emotional tax.

Shouldn’t I Look at Nvidia Each Day? It’s BIG and It’s Volatile!

Let’s use Nvidia as an example. It has become an important holding. Dopamine rush would make me want to look at its price all day long… every tick. Clearly that’s not practical, so maybe once a day? It’s volatile. There’s so much going on with it. It is the chip leader, it’s AI; it’s the future. The stock just overtook Apple and Microsoft to be the biggest. It just split 10-for-1. It’s got plenty of drama.

On Thursday, June 20th, it sank -3.5%; the day after it rose 3.5%, up nearly $5, then down the same. That’s a monstrous 7% swing, but it ended where it started. For my share holdings, that’s thousands of dollars up or down, each day. That can be gut-wrenching, but I prefer using a longer lens. Starting June 1st – if I ignored it during my vacation – I would have missed a wild ride, but NVDA surged +19.3% in 20 days, peaking at +23.7%. The average move for those 13 trading days was +1.4%, or $42 billion a day!

Now if I used a much longer time horizon, the return was +3,347% and the daily move averaged +0.3%.

Nvidia Table 1

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

Granted, not all stocks are NVDA, but this shows the importance of looking away to see a bigger picture.

But, you may ask: What if it drops 10% next week?

I prefer asking, What might Nvidia look like five years from now? This allows me to take a more stoic and peaceful investing approach.

Naturally, I look at data all the time, but I prefer to run it down weekly, not daily, hourly – or each second.

Last week saw a rising market and a sinking Big Money Index (BMI):

Big Money Index Chart

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

Is this a cause for concern? Well, the first thing we should take note of is that buying is shrinking, but so is selling. This wedge tightening means that accumulation and distribution are both dwindling:

Big Money Stock-ETF Chart

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

This is happening while unusually large trade volumes are staying fairly constant.

Big Money Trading Activity Chart

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

This indicates a potential shift for a few reasons:

  1.  Fewer stocks are making new highs, while more stocks are making new lows. This table shows a disconcerting picture:

H-L Table 1

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

  1. The stocks that have been hitting new highs on big volume are the huge ones – the megacaps. Look at this chart of monster stocks getting gobbled up since May 1st:

BIG Buying-Selling Market Cap

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

  1. When you look past the glitz and glamour of the megacaps, sector breadth shows a tired market. Below, you’ll see that, in terms of price action, tech is surging higher while nearly every other sector is chopping sideways. And when you focus on unusual buys and sells, there’s not a ton of green, and there is some red emerging:

Technology vs XLK 1

Utilities vs XLU Chart 1

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

Sector Table 1

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

  1. Breadth is at alarmingly low levels. The following charts show us that the top big stocks are leaving the rest in the dust. In this chart, we see the top 50 S&P stocks are outperforming both the S&P 500 and the equal weighted S&P 500, meaning the biggest stocks are holding up the market.

SP 500 Chart

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

  1. 64% of SPX stocks today are below their 50-day moving average. In other words, 2/3rds of S&P 500 stocks are down considerably while the index is at ATH.
  1. Seasonality says that while we may normally expect a nice July, we should expect some volatility especially in August and September (and the first weeks of October):

MAIN Index Table 1

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

Uh-oh. So far, this doesn’t sound much like my normally bullish self as I echo some prevalent bearish theories. But again, it’s all in perspective and your ability to look at the bigger picture. The market always brings opportunity even when it may look gloomy. Weak breadth may feel like pending doom, but in fact it’s a rare gift historically speaking. The following chart essentially says that all the laggards are set to play major catch-up. When breadth levels fall this low, the equal weighted S&P 500 historically outperforms big-time with a high win rate:

SP500 Table 1

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

Summer months often mean summer bumps. Nervous energy and focusing on every little thing may limit our future gains. If we clear our heads and step back, we can recognize the longer-term opportunity.

The playbook is always the same: Find stocks with superior fundamentals and big money inflows. This drastically reduces the playing field and focuses our opportunity list. We specialize in finding the next Nvidias. They reveal themselves through growth and performance. The trick is finding them early on.

The next trick is deciding to buy. And as Rush drummer Neil Peart said: “If you choose not to decide, you still have made a choice.”

Navellier & Associates owns Nvidia Corp (NVDA), Microsoft Corp (MSFT), and some accounts own Apple Computer (AAPL), in managed accounts.  Jason Bodner personally owns Nvidia Corp (NVDA), but he does not own Microsoft Corp (MSFT), and Apple Computer (AAPL). 

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
More European Political Fireworks Are Coming

Sector Spotlight by Jason Bodner
Try Not to Track Stock Prices Daily

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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