by Jason Bodner
November 4, 2025
I saw Willy Wonka and the Chocolate Factory as a kid. There’s a scene where Charlie’s grandfather and he try a super-fizzy body-lifting drink. It works, and as they float toward the ceiling, they get dangerously close to the fan. The sharp blades spell doom – until they realize that if they burp, they’ll stop rising.
Sound familiar? Stocks have been floating higher in ways that make many investors nervous. We know it can’t last forever, and the higher we go without a “big burp,” the harder the fall. But guessing outcomes is usually a losing game, while studying and reacting to data lets us adapt when things turn unpredictable.
Some Wonka trivia: Gene Wilder only agreed to play Wonka if he could limp out and then suddenly do a somersault, to show his unpredictability. That’s how we should approach markets – expect surprises.
These days, many investors worry that we’ve floated too high, too fast, but what does the data say?
It’s true that the yellow-flags are piling up. There are cracks in the market which could cause concern, but my approach is to keep emotion out of investing and focus on the data. I believe that this outlook creates better decisions, so before we get carried away, let’s break down and analyze what the data is telling us.
The Big Money Index continues to drift lower. After a bout of fresh outflows, the index came under new pressure. This is because it’s a 25-day moving average of net new inflows. If one day sees 75-inflows out of 100-signals, that day reads 75%. We average the last 25-days to gauge overall inflows or outflows.
The recent BMI decline comes from some weak inflow signals plus a sudden spike in outflows.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Before addressing whether this trend will continue, let’s keep breaking down the data.
ETFs haven’t succumbed to major outflows yet, though we saw a slight uptick. On October 20, there were 18 ETF outflows – tied for second most (with October 10) since April 8, which saw 288 ETF outflows – the most extreme ETF outflow day in market data since 1990. Compared to that, 18 isn’t even a sniffle.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Still, that’s another yellow-flag with elevated trading volumes amid outflows is another yellow-flag:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Last week (through Thursday), outflows exceeded inflows by 1.4-to-1. In simple terms, an outflow occurs when a stock breaks below an interim 11-week low on heavy volume and volatility. (The full algorithm is more detailed, but that’s the essence). Companies between $5 and $50-billion showed the most outflows:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Sometimes there’s profit-taking before a new leg higher. Other times it deepens, sentiment sours, and markets correct. Which is it this time? Before answering, let’s keep digging deeper into the data.
Outflows are concentrated in Technology, Discretionary, Industrials, and Financials—growth-heavy sectors that often power bull-markets. They’ve been trading at or near highs for a long time, so cooling makes sense.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
On the positive side of the ledger, technology shares also saw the most inflows, along with Health Care stocks.
From a sector-ranking perspective, not much has changed: The signals remain mixed. Utilities still rank at the top, but not because defensive investors are hiding out. Speculation that AI will demand more power continues to drive capital into the sector. Technology and Industrials follow, which is bullish since they are growth oriented. Discretionary, however, is disappointing, in eighth-place. I prefer to see Discretionary lead the list, as that signals a strong consumer, but when inflation runs hotter, discretionary can fade.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Here’s another mixed signal: nine of the S&P’s 11-sectors saw elevated outflows on October 29 and 30. That could mark the start of a broader pullback. If investors view November as a good time to take profits, we may see a short-term dip in equities lasting anywhere from a day to a few-weeks.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
On the plus side, the last time the same thing happened was just a few weeks ago on October 10th. We saw very similar distribution across nearly all sectors. The SPY went on to rally 5.3% from there.
Now for the good news:
- November is historically the strongest month, with 74% of all Novembers since 1990 being positive with an average return of 2.54% on the S&P 500 and even better on the NASDAQ and Russell 2000.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
- We just got another rate cut – albeit with a split decision. Rates typically don’t get cut and then suddenly stop or even rise. All indications say we will get continued rate cuts through next year.
- Inflation, while ticking up to 3%, is still well below the 65-year average of 3.75%.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
- Lower taxes remain a tailwind, due to new provisions in the Big Beautiful Bill.
- Recent trade talks are productive, as Trump struck deals with Asian partners and made meaningful progress with China. The U.S. reduced tariffs and reopened chip sales, while China agreed to buy soybeans and American energy, crack down on fentanyl, and pause rare-earth export controls.
- Earnings also impress. FactSet shows that 64% of the S&P 500 companies have reported as of October 31, with 83% beating EPS estimates and 79% beating revenue estimates. Year-over-year earnings growth is 10.7% — the ninth-straight positive quarter and fourth-straight double-digit gain.
- On valuations, the forward P/E for the S&P is 22.9, above the 5-year (19.9) and 10-year (18.6) averages. That raises some eyebrows, but remember that these P/E multiples can normalize by earnings growth, not just by falling prices. With strong fundamentals, I favor the latter.
All told, we’re set for a seasonally strong finish to the year, even with a few air-pockets along the way. The best defense remains a great offense – own excellent growth stocks with strong sales, steady earnings, and consistent institutional support behind them. If the data shifts, it means more opportunity.
As Lao Tzu wrote, “Those who flow as life flows know they need no other force.”
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
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Opaque Jobs Data Could Trigger More Fed Rate Cuts
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Is Wall Street’s Investment Clock Broken?
Global Mail by Ivan Martchev
Geopolitics are About to Come to the Fore in the Next Two Weeks
Sector Spotlight by Jason Bodner
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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 and 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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