After three agonizing months from August through October, the sharp and swift rally in stocks the last six weeks has been impressive… even dramatic.
A lot of investors have missed out on some of these gains because of the record amounts of cash sitting in money market funds.
But money is clearly flowing into stocks.
And that’s perhaps the most important investing lesson I’ve learned: Everything comes down to the flow of money.
According to Morgan Stanley, institutional investors account for around 90% of the daily trading volume on the Russell 3000 Index, which is the broadest major U.S. stock index.
The problem is… a lot of this money flow is undetectable.
Imagine being unaware of that much money flowing in or out of stocks, and basing your investment decisions on the visible 10% of trading volume?
That puts most investors – especially individuals – at a big disadvantage.
Institutions and big-time players turn to professionals like me, when I ran a trading desk, to complete their trades as quietly and secretly as possible so they don’t impact prices. One of the most effective ways of doing that is using private networks like Dark Pools.
A quick reminder: I’ll explain Dark Pools and how we can still track the flow of money in a Special Event this Wednesday, December 13, called The Dark Pool Summit. It gets underway at 8:00 p.m. Eastern time, and it’s completely free to attend.
When I left Wall Street, I created a system of my own by reverse engineering what I had pieced together during my time brokering these trades. I identified ways to tap into data that shows the trades placed by the big boys on Wall Street, and I can track nearly every dollar that changes hands on a day-to-day basis throughout our financial ecosystem.
Let’s give you back an edge by looking at where Big Money has been going in this latest stock surge.
Tracking the Stealthy Big Money
Let’s start with the biggest trend of all, which is that Big Money is doing a lot more buying than selling right now.
My proprietary Big Money Index (BMI) stands at 75.4 at the moment, which tells us that 75.4% of all unusual activity – the Big Money kinds of activity – are buys, leaving just 24.6% as sells.
This is strikingly evident when you look at the signals themselves. Here is all of 2023, and I’ve circled the recent rally, where you can clearly see a lot more green bars (buy signals) than red bars (sell signals).
That tall green bar in the circle came on Dec. 1, when my system picked up 60 times more buy signals than sell signals (303 to 5).
So what kinds of stocks is Big Money flowing into?
Look at the following chart and you see a clear answer – small- to midcap stocks.
Since Nov. 1, 84% of all unusual buys my system detected were in stocks with market capitalizations between $500 million and $50 billion. Most of those – 50% of all signals – came in stocks valued between $5 billion and $50 billion.
And drilling into the sector, we find another clear winner: technology. The Technology Select Sector SPDR (XLK) has surged nearly 15% in November and December. And once again, we see lots of green (buying) and hardly any red (selling).
In fact, the four strongest sectors in my system right now are Technology, Discretionary, Industrials, and Financials. Money continues flowing into growth areas, which are the seeds of long-term bull markets.
From there, I drill down into individual stocks and ETFs to see where the Big Money is flowing.
For example, I currently recommend Dynatrace (DT) in my Quantum Edge Pro service. It’s a software company that provides security for cloud computing, application monitoring, business analytics, automated fixes, and lots of other tech “stuff.”
Shares are above our buy-in price, but we’re holding for more gains, in part because Big Money has shown a lot of interest in this stock throughout most of 2023.
Being able to track Big Money and “go with the flow” puts you at a tremendous advantage over probably 99% of all other investors out there who, through no fault of their own, don’t know what to look for.
The data clearly shows that money is flowing into small- to medium-sized companies in the technology sector. We can’t “beat them,” so we might as well “join them” on the ride higher.
Editor, Jason Bodner’s Power Trends
P.S. I’ve been studying money flows and Dark Pools for decades (I even worked on Wall Street building Dark Pool systems myself), and I developed my system to track these massive money flows.
According to a back test, my system would have beaten the market by a whopping 7-to-1 for decades, and its pinpointed dozens of winners that have gone on 100% plus runs in just a few months.
This is the power of the Dark Pools. The power of knowing where the money is flowing.
On Wednesday, December 13, at 8:00 p.m. Eastern, I’m hosting that Special Event called The Dark Pool Summit to give you the full details.
I think you’ll find what I have to say helpful and eye-opening.