We begin second-quarter trading today, but before we leave the first quarter behind, let's take a moment to celebrate our big gains.
The quarter made a lot of investors happy – at least those who aren't too heavy in the record levels of cash sitting on the sidelines. The S&P 500 jumped 10.2% in the quarter, wracking up a year's worth of gains in just three months.
Our Quantum Edge Pro portfolio far exceeded that. It surged a phenomenal 15.8%, generating 18 months of historical market returns in just one-sixth the time.
This massive rally goes back to the beginning of last November, with the S&P 500 up 27.6% in five months in an unnaturally uniform march higher.
This is when our emotions bubble up and we start to worry. I mean, this can't last forever, can it?
Of course not. But we have to remember one unemotional rule of investing that you hear me talk about often: New highs almost always lead to more new highs.
While the index and our stocks won't stay on this trajectory literally forever, it is highly possible that they will continue to outperform historical averages. That's been my expectation for 2024 all along, and the phenomenal first quarter doesn't change that.
In fact, this seemingly parabolic move is not new. We've seen multiple big rallies in the SPDR S&P 500 ETF (SPY) the last nine years.
Source: MAPsignals.com
To me, all those tight upward channels reinforce that idea that we should not get emotional in thinking what "should" or "shouldn't" be, but rather objectively engage in what is.
And the best way to objectively analyze markets is to rely on pure, unemotional data. And the data is telling us to relax and enjoy the ride.
The Big Money Index (BMI) has turned sideways since falling from overbought in February. It starts this week at 74.2, so three of every four Big Money signals are still buys. The BMI has stayed in the 70s every day since dropping below the overbought line at 80 nearly two months ago.
Source: MAPsignals.com
As you know, historical data tells us to expect market weakness when the BMI falls from overbought. There has been muted choppiness, but we avoided the proverbial iceberg due to data lurking beneath the surface.
Selling simply hasn't increased enough to push the market down. The following chart shows the daily aggregate Big Money buying (green bars) and selling (red bars) in U.S. stocks. There just isn't much unusual selling going on.
Source: MAPsignals.com
We're now in a stretch of several weeks with no big earnings reports. They'll pick up again in a couple of weeks. These in-between periods can be volatile with few catalysts to influence trading, but we didn't see volatility – we saw more buying.
And even better, buying remains heaviest in small- and mid-cap stocks, which raises the probability that this bull market keeps running. Nearly 85% of last week's signals were on those stocks, which are right in our bullseye here in Quantum Edge Pro.
Source: MAPsignals.com
We also continue to get bullish signals at the sector level. Analyzing each sector's buying and selling, we see two clear patterns:
All 11 sectors are strong. There are no weak links at the moment hiding potential cracks.
The individual sector charts show the same thing as the Big Money Index – there's just no selling to worry about right now. Communications is the only sector that shows selling, but there are very few stocks in it – just 79 (1.4%) of the nearly 6,000 stocks our Quantum Edge system tracks.
We kick off the second quarter in great shape. We're making good money, and we own the highest-quality stocks in the market that Big Money is also interested in. We will have ebbs and flows as the next earnings season gets underway and the Federal Reserve meets again at the end of April.
I'll be back in touch with your next Video Issue this week, talking more about the market and our stocks heading into the second quarter. The trends are undeniable, and the data indicates more profits ahead. Let's continue making the most of it.
Talk soon,
Jason Bodner Editor, Quantum Edge Pro
P.S. Below you'll find the weekly ranking of the Top 10 and Bottom 5 stocks according to my system.
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