By Luke DowneyNovember 1, 2021

My playbook for the current large-cap bull market

I love a good bull market. 

I know there will always be bulls and bears. But it’s clear investors who’ve run with the bulls have thrived. It’s been the right stance for years… decades even.

That said, markets are off to a strong start in 2021, with the S&P 500 and Nasdaq 100 both up more than 20% since the start of the year. And October was great for these two major indices (both up 7%-plus)… 

Plus, history says we’re in for more highs—as I said well over a month ago, the fourth quarter is historically strong for the stock market.

That means you should be getting the bull horns out.

One specific area is poised for more highs… And there’s an easy, “one-click” way to take advantage…

But first, let’s lay some groundwork. 

Why you should always follow the money

Big Money institutional investors move markets more than news, sentiment, or anything else. They’re the primary driver of breakout performance in stocks. It’s a trend I’ve seen repeated over and over throughout my career.

I always start by taking a quick “top-down” view of the market. I created the Big Money Index (BMI) as a simple way to check on Big Money activity. The BMI zeros in on any big buying and selling happening in stocks. It serves as a sort of market traffic light… When it’s rising (like now), that’s the green light to get bullish. And when it’s in a downtrend, it’s time to prepare for lower prices.

Below, you can see the BMI since March 15, 2021. I’ve overlaid it with the iShares Russell 2000 ETF (IWM) to show how both have been choppy and closely mirrored each other. One reason I’m upbeat is because the BMI recently made a big upward climb (beginning at the yellow line) and hit a three-month high a couple of weeks ago. That’s a green light for stocks:

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And if we dig deeper, we can see big buying across the board. 

Below, you can see a chart showing all of the stocks getting bought and sold by market cap for the week ending Oct. 29, 2021. Off to the right (in the “Total” column), you can see 402 buy signals vs. 260 sell signals. Put simply, over 60% of the action in the stock market last week was buying.

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But what really pops out to me is the amount of buying in large-cap stocks (with market caps greater than $50B). You can see this market segment in the second column from the right. Last week, exactly 70% of the action in large caps was buying. 

In other words, institutional investors are scooping up big companies.

Remember, we always want to follow the Big Money… You don’t want to fight this large-cap uptrend. 

Before we move on, I need to mention one last detail. The 10 biggest stocks in the S&P 500 make up 29% of the index’s total value. And the Nasdaq is even more concentrated: The top 10 stocks account for 55% of the index’s value. Almost every one of them is a technology stock.

This is important because many of the stocks getting bought make up a big chunk of the major indices (especially the Nasdaq). Remember, the major indices move up or down based on the stocks they own. So when large-cap stocks are getting scooped up… it’s a safe bet the S&P 500 and Nasdaq will likely move higher… possibly MUCH higher. 

My playbook for profiting from the latest Big Money data

The Invesco QQQ Trust (QQQ) is an ETF that tracks the Nasdaq 100. It’s commonly known as the Nasdaq technology ETF because it’s full of huge tech stocks like Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), and Tesla (TSLA)… the same stocks leading this market. (Note: I own MSFT and TSLA personally.)

It’s also worth noting QQQ has had six Big Money buy signals this year:

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Now there haven’t been recent buy signals (green), but that’s set to change. Why? Because many of the individual large-cap tech stocks are firing buy signals. 

Below, I’ve included Big Money charts for MSFT and TSLA this year. Just look at all those buy signals: 22 for MSFT and 20 for TSLA… those are ridiculous numbers for a one-year timeframe.

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And as you can see in the chart below, the BMI and QQQ have practically been joined at the hip since mid-July (focus on the shaded yellow area)… 

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We’re a third of the way into historically one of the best times of the year for investors. And the Big Money data shows the buyers (a huge driver of stock outperformance) are targeting mega-cap tech stocks. 

QQQ is a perfect one-click way to ride the current uptrend. It lets you own the big names while spreading risk across 100 high-quality tech stocks. 

Luke Downey is editor of Curzio's The Big Money Report, which recommends the best long-term growth stocks. Luke honed his strategy over many years at Wall Street institutional derivatives desks, and as co-founder of investment research firm Mapsignals. Luke is also an options instructor with Investopedia Academy.

P.S. If you want in on a portfolio full of Big Money’s favorite stocks, check out my newsletter, The Big Money Report.

Just last week, I highlighted a rare chance to buy one of tech’s best growth stories… at an incredible 50% discount.

But hurry—Big Money moves could quickly send this stock out of “buy” range. Learn more here

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