It’s almost like stocks are watching the calendar this year.
I said for months that I expected stocks to follow their historical pattern and have a volatile August and September. Sure enough, the S&P 500 peaked on July 27, started August with four straight down days, and whipped us around for three months.
The one notification that didn’t go off apparently was that stocks were supposed to emerge from the volatility and turn higher in October.
Maybe Mr. Market entered it on his calendar wrong, because as soon as Nov. 1 hit, up went stocks.
The S&P 500 moved higher eight straight days, the longest streak in two years. And yesterday’s gains to end the week made it nine out of 10.
That’s pretty compelling, and my data increasingly shows that now is the time to make money.
Climbing Out of Oversold With More to Come
I’m biased, I admit. But my Big Money Index (BMI) is the best and most predictive market data I know about.
The BMI gives me a great snapshot of what the big money is doing. The really big money.
Institutional money flow is the main driver of stock prices. It’s not mom and pop, or you and me. Institutions account for 70% to 90% of daily trading volume, so being able to see whether that money is buying and selling and what that money is buying or selling are huge advantages.
My Quantum Edge system is based on algorithms I developed that spot this unusual buying and selling activity, which isn’t visible to most folks. Big money traders do their best to keep their activity under the radar, but I learned their secrets after running a trading desk and matching up these very same institutional buyers and sellers.
When we tally these unusual buy and sell signals across 25 days and plot a moving average, we get the Big Money Index. It has proven to be a reliable indicator of overall money flows, and it gives us a data edge that most people don’t have.
If we look at the BMI now, we see a much-improved picture. I’ve mentioned to you before how the BMI slipped into “oversold” status (marked by the green line at 25) in early October. It stayed oversold longer than usual, but after bottom at 17.4 on Oct. 30, it finally climbed back above 25 this past Monday.
Even just looking at the last two years, you can see how the BMI and stocks – as measured by the blue line of the SPDR S&P 500 ETF (SPY) – have bounced every time after going oversold. This is consistent with historical data, which is why the BMI going oversold is actually a bullish signal.
The current BMI reading of 29.1 tells us that just about 30% of Big Money signals are buys, meaning 70% are still sells. But that’s nearly twice as many buy signals as Oct. 30, and more importantly, buying is almost certain to accelerate – especially here in November and December, which are the two strongest months of the year.
Here’s Where the Money Is Going
We had to be a little patient to see the fruits of that bullish oversold signal, but we seem to be there right on time for the end-of-year Big Lift I’ve anticipated for all of 2023.
We know that Big Money is picking up its buying, but next we need to know what Big Money is buying – so we can go along for the ride.
That answer probably won’t surprise you, but the most action right now is in tech stocks.
My system maps these buy and sell signals by sector, and here’s what tech looks like right now. After selling (red bars) peaked on Oct. 25, and as it has continued to subside, buying (green bars) has picked up the last couple of weeks.
Over the last week, my system picked up 93 Big Money buy signals to 32 sell signals – pretty much three times more buys than sells.
Get Ready Now
Not surprisingly, six of the Top 10 stocks in my Quantum Edge system – the best of the best – are tech stocks.
Topping the list is a leader in cloud networking, which I think is one of the best stocks to own for both the next few months and even the next few years. Its Quantum Score of 87.9 is outstanding, and the fundamentals and technicals rate equally strong at 87.5 and 88.2 respectively. With the stock at the top of my proprietary system and recommended in my Quantum Edge Trader service, I can’t share the name with you here. But it has had a strong year and an impressive bounce in just the last two weeks, and I see a lot more to come.
Of the big-name tech stocks right now, I like Microsoft (MSFT) the best. Its Quantum Score of 81 is in the buying sweet spot. The fundamentals are solid at 70.9, and the technicals are quite strong at 88.2.
It has moved higher 11 of the last 12 trading days, is up more than 50% so far this year, and Big Money has a lot of interest in the stock right now – as you can tell by those green bars.
I would be shocked if stocks in general aren’t higher by the end of the year, with the highest quality stocks generating outsized profits over the next couple of months. These are the stocks with the Quantum Edge trifecta of muscular fundamentals, strong technicals, and Big Money inflows.
I’ve long expected tech to lead the Big Lift, so I would try to make sure you have some of those stocks, too. They should help make a nice holiday celebration.
Editor, Jason Bodner’s Power Trends