I’m a pretty mellow guy, so I never throw things at the financial-channel talking heads.
And I usually don’t yell about the crazy things that seem to be happening.
But I often feel like just turning it off, walking away from it – for a few days or even a few weeks – and tuning back in later to see if the craziness is gone and sanity restored.
That feeling is especially strong every August, when Wall Streeters are sunning themselves at the beach, trading volume is low, and we get price swings that are, well, just stupid.
Like this past week.
Nvidia (NVDA) – one of the hottest companies and most-widely-held stocks – reported a blowout quarter that shattered all expectations.
The massive chipmaker – a leader of the artificial intelligence wave – turned in the coveted earnings trifecta– earnings beat, sales beat, and substantially higher guidance.
That kind of report usually powers a stock to stratospheric heights. NVDA did indeed soar more than 10% after hours following Wednesday’s report.
And… a $1.1 trillion company that shot up 10% should lift the entire market. Thursday seemed poised for exactly that with NASDAQ futures up 1.5% before trading began.
Nope. Not in August. Stocks closed lower for the day – the NASDAQ was down nearly 2% – and NVDA eked out a measly 0.1% gain.
This is exactly the kind of craziness that makes me want to vacation myself – for a month.
It probably makes you want to log out of your brokerage account – or pull the computer plug out of the wall – and disappear yourself.
But disappearing would be a mistake – and a costly one at that.
In one of those odd ironies that adds to the stock market’s allure, volatility is accompanied by opportunity. That crazy whipsawing chops the prices of even the market’s very best stocks – giving the shrewdest of us a chance to buy today for bigger profits tomorrow.
You can then ride those elite stocks to big profits through the end of the year – and, the way it looks currently, into 2024.
And you can do this at entrancingly lower levels of risk.
I’ve shared before multiple catalysts and data points lining up almost perfectly that point to a big and profitable fourth quarter coming our way:
- Inflation continues to fall (as Jerome Powell acknowledges), so…
- The Fed is done or about done raising rates.
- Record amounts of uninvested cash sit on the sidelines waiting to flood into stocks.
- Corporate earnings fared much better than expected, and growth is expected to accelerate in the coming quarters.
- The fourth quarter is far and away the best time of the year to make money. I mean really far. You have to see the data to believe it:
Let’s add one more to the list: the phases of Big Money.
Here Comes the Big Money
You may remember that I cut my teeth in this business at a trading desk, matching up institutions that were buying and selling stocks.
These trades are often worth millions of dollars, and Big Money tries to do them quietly.
I learned how to track Big Money’s trading footprints to detect when it is buying or selling, and I built algorithms into my Quantum Edge system to alert me to these signals.
Institutional trading makes up between 70% and 90% of daily volume, on average. Obviously, you have a greater chance of making money if you know what stocks the big guns are buying.
In developing the system and using it successfully in my own investing and in stocks I recommend to my readers, I also noticed that Big Money tends to flow in cycles.
In addition to aligning closely with historical patterns, the recent action in stocks also fits the typical cycle of Big Money ebbs and flows:
- Phase 1: Big buying, little selling. The rising tide lifts all boats.
- Phase 2: Buying slows, selling starts. The peak is nearby.
- Phase 3: Buying all but stops, selling grows. The pullback is here.
- Phase 4: No buying, lots of selling. The end is in sight.
Here’s what the cycle looks like, in a graphic put together by my research firm, MAPsignals:
My data indicates to me that we are likely in Phase 3. Buying has definitely slowed while selling has picked up.
This is consistent with market seasonality, with August and September being the worst months of the year.
But the story doesn’t end there. If we’re in Phase 3, we have one more Phase to get through before we get back to huge buying and little selling.
Yes, that means more volatility and speed bumps along the way, but we’re nearing the on ramp to the profit expressway.
This year, that expressway could more resemble the autobahn. The Big Money cycle converging with the market’s cycle turbocharges the opportunity.
That’s why walking away from the craziness, no matter how tempting it might be, is the last thing you want to do. Great stocks go on sale just because it’s August and September, not because they’re no longer great stocks.
Look for stocks with superior fundamentals, strong technicals – even if they weaken a bit in the volatility – and Big Money support. (If you want my help and the benefits of my system, click here to learn more.)
Big Money was flowing into stocks before Wall Street became a ghost town this month. It will gain. Take advantage of this temporary craziness and you can be wealthier by the end of the year.
Jason Bodner’s Power Trends
Disclosure: On the date of publication, Jason Bodner held a position in Nvidia (NVDA).