by Jason Bodner
October 6, 2026
At the end of October, Daylight Savings Time will end, and our sunsets will come earlier each day until December 21 – the shortest day of the year – but that’s not the coldest day of winter – it’s not even close.
East of the Rockies, the coldest stretch usually shows up about a month later, in late January. Land, air and water hold on to heat, so it takes weeks for the lost sunlight to catch up. Scientists call this seasonal lag. The reality is summed up in this aphorism: “When the days get longer, the cold gets stronger.”
Here’s the game plan in weather patterns: The sun hides first, then the thermometer catches up later.
Markets work in a similar way. I think we’re very close to the market’s winter solstice right now. But it may not be “the” bottom” of some of the specific market indexes we follow.
The Indexes Haven’t Felt the Cold… Yet
If you only watched the headlines, you’d think everything was fine. The S&P 500 approached new highs last week and now sits just 1.7% below its August high. The NASDAQ 100 is even closer to its peak level.
Those are the indexes, but the market underneath them tells a different story. For instance, the Russell 2000 is now 8.5% off its high. The smaller the company, the worse it gets. Among stocks under $2 billion market cap, 57% are in a bear market. For giants worth over $300 billion, it’s just 22%. Of the 5,000+ stocks we track, 52.5% of them sit 20% or more below their highs, meaning over half of all stocks are in a bear market. A handful of huge names are holding the index up while everything beneath them freezes.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Selling in Late September Sent the Big Money Index Down Near “Oversold” Territory
The Big Money Index (BMI) tracks big institutional buying and selling. Above 80% is overbought, and below 25% is oversold. Last Thursday, it hit 29.3%. Since 1993, the BMI has never been below 30% with the S&P this close to a record. The VIX fear gauge is just 16, while the pain is being felt in the stocks.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Last week, buying nearly dried up. For four-straight days, inflows were less than 13% of all signals. We’ve seen 58-streaks like that since 1990. The S&P was never this close to its high during any of them.
Historically, what came next was strong. Six-months later, the S&P averaged a 9.8% gain. A year later, it gained an average 17.9% and it was higher 88% of the time, but the weeks right after can still be bumpy.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
ETFs told us the same story, with 100 or more outflows four-days in a row. That ties the record. It happened only three-times before: December 2018, September 2022 and April 2025. All three came at or near major lows. A year later, the S&P was up between 20% and 40% each time.
Sector Spotlight: The Last Shelter Cracks
All sectors suffered net outflows last week. In the previous week, technology was the lone exception.
Financials got hit hardest, with 203 outflows vs. just three inflows. Banks alone saw 100 outflows, with no inflows. Before last week, financials were the market’s hiding spot. They have the fewest stocks in a bear market of any sector, and the most near their highs. Now, that last safe spot got hammered too.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Real estate came next with 139 outflows, nearly all REITs. Hotels, restaurants and leisure stocks saw 47 outflows and zero inflows. Dividend payers still foot the bill. The median stock sold pays a 2.4% yield. The median stock bought pays nothing. The money is going toward Health care, which led all sectors with 38 inflows, mostly in lab tools and genetic testing names.
Then there’s AI… Since the July and August lows, smaller tech stocks worth $1 billion to $50 billion are up a median 18%. Similar-sized stocks outside tech are up just 3%. Chip equipment makers lead the way, up 28% from their lows. Big money kept buying these names even during this week’s flush. Still, 64% of these smaller technology stocks are in bear markets, so they have plenty of room to run.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Has Peak Rate Fear Passed?
Much of this comes back to interest rates, as investors worried the Fed might hike again. Last week, that worry hit the bond market. Bond ETFs saw 250 outflows in four-days, more than stock ETFs. Long-term Treasury funds got sold every day. The only bonds anyone wanted were short-term (cash-like) funds.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
When investors dump long bonds this broadly, the fear of rising rates is often close to peaking. Friday’s weak jobs report added to that case, and it will be hard for the Fed to hike rates into a soft job market.
If rate fear has peaked, we’ll see it first in the groups hurt most by high rates. Utilities and real estate are both yielding sectors sensitive to rates while discretionary are sensitive to consumer spending with constrictive rates. About half of all REIT and utility stocks are technically oversold, roughly double the rate for the overall market. When the selling in these groups dries up and buying shows up, that’s our tell.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The BMI is a 25-day average, so it lags by design. It keeps getting colder after prices have already turned. At its current pace, the BMI should reach oversold this week, perhaps today, or around October 6.
That’s not necessarily the end of the decline. The BMI could keep falling for another week after that.
History says not to wait for it, though. In 12-oversold episodes since 1990, the S&P’s low came within a week of the BMI’s low. In all 12-episodes, the S&P bottomed first. By the time the BMI hit bottom, the S&P had usually bounced back by about 2%.
That puts a likely low for the market over the next week or so, October 6 to 14. That also lines up with the midterm election calendar. Since 1990, seven of nine midterm fall lows landed in the first half of October.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
There’s one warning. In 2018, the S&P also sat near a high when the BMI went oversold. It fell another 11% into December as the Fed kept hiking rates, at least once too often. That’s why rates could be the key to the bottom this time. If peak rate fear is behind us, history leans toward a quick finish.
So far, the major indexes haven’t felt the cold. The market underneath took all of it. But the days are already getting longer, and the turn usually shows up before anyone sounds the all-clear.
“No winter lasts forever; no spring skips its turn.” – Hal Borland
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Fourth Quarter is When Stocks Usually Shine the Brightest
Income Mail by Bryan Perry
The Bond Market Deserves a Sigh of Relief
Growth Mail by Gary Alexander
The Current AI Scare Resembles Past Techno-Terror Tales
Global Mail by Ivan Martchev
Sector Friction in the S&P 500 Widens
Sector Spotlight by Jason Bodner
Like the Seasons, Markets Often Wax and Wane on Schedule
View Full Archive
Read Past Issues Here
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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