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The Big Money in stocks is shifting…

On March 10, I told you about the rare market signal I was watching… and how I was preparing to buy big once it flashed green.

On March 19, it did…

That’s the day the markets became oversold. 

A few days later, on March 23, the low for the market was made. That means that the closing low of 2,237 for the S&P 500 is most likely the low of this COVID-19 reset. 

The great thing is, this rare indicator also guided me back in December of 2018.

Do I have a crystal ball? Nope.

I’m simply a disciple of data.

So, did I buy big? 

I did… 

I bought a mix of stocks in semiconductors, healthcare, home improvement, athletics, and some discretionary names.

Now, I don’t want to sit here and pat myself on the back—I’m merely pointing out how you can win in investing by having a plan.

The plan can even be simple, like: “Don’t buy stocks when the market is overbought,” or “Raise cash.”

When the green signal hits, markets can move fast… So you have to be prepared going in.

Here’s the proprietary Big Money Index (BMI) I follow. It tracks big money moving in and out of thousands of stocks.

When it gets oversold—or in the green—odds are, it’s a good time to buy great stocks:

Click to enlarge

But another thing I want to draw your attention to is how the BMI is rising. It’s been rising for over a week.

That means the big money players that were hitting the panic button are no longer there. And buyers will likely show up soon. 

Typically, you don’t want to fight that trend. 

And it makes sense given how rapid the market has been lifting. Here’s a zoom in:

Click to enlarge

So, what’s next? Are real buyers stepping into the market?

Let’s turn to the data…

A great way to see what’s happening on a daily basis is by looking at the daily trend of buying and selling in stocks.

As you can imagine, selling was extreme back in mid-March.

To show you how drastic it was, have a look at the chart below.

This chart shows the net buys/sells for the market on a given day. 

If there’s a green bar, there are more buyers than sellers.

If it’s red, sellers won the day.

I’ve circled what’s very important—after the massive selling, small buyers are showing up:

Click to enlarge

As you can see on the far left, the last time we had massive selling (December 2018), tiny green bars showed up right as the market took off like a rocket.

Here’s the zoom into what we’re seeing today—on the far right:

Click to enlarge

The key here is how the data has been changing—for the better.

Following data makes the game so much easier than following headlines… for me at least.

Bottom line: If you’re down about missing the bottom, don’t be.

This isn’t an all-clear signal. It’s just what tends to happen after markets get wickedly oversold.

Markets will likely zig and zag a bit from here. I’m sure there will be pullbacks to buy into.

A lot of folks out there think we’ll be retesting lows, including my colleague Frank Curzio. But as of now, my data says that’s unlikely.

The BMI shows that the buying opportunity I anticipated has begun… 

Like Frank, I believe it’s a good time to start picking away at quality, long-term assets—companies that are most likely to weather the crisis well. 

But I’m not worried about retesting lows. Based on history, we’ll be looking at much higher prices a year from now. 

Just remember to stay focused on the data—not the headlines. 

And don’t chase stocks—be patient. We’re heading toward a buyer’s market…

Luke Downey
Luke Downey is currently co-founder of Mapsignals, which focuses on finding outlier stocks by following the big money. Luke is also an options instructor with Investopedia Academy. Prior to Mapsignals, he spent many years on institutional derivatives desks at Cantor Fitzgerald & Jefferies, LLC.

Editor’s note: There’s an easy way to take advantage of the enormous buying opportunity ahead

In this month’s issue of Curzio Research Advisory—released just last week—Frank recommended FIVE STOCKS best-positioned to weather the COVID storm… and soar as the market rebounds.

In the coming months, Frank will be recommending more of these names. And right now, you can try Curzio Research Advisory for a ridiculously low $49—RISK FREE.

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