Stocks Got Choppier, But Big Money Isn't Selling More than Usual
Several people reached out to me about last week’s volatility, so I know investors were feeling it.
You probably did, too.
The Dow had its worst week in more than a year, and the S&P 500 posted its worst week since January. The broad index dropped only 1%, which normally wouldn’t cause concern, but we’ve gotten used to stocks moving higher the last five months.
Our Quantum Edge Pro stocks also felt the heat, falling 2.2% on average, led by the 16% slide in e.l.f. Beauty (ELF). As we talked about, competitor Ulta Beauty (ULTA) warned of slower demand than expected in the first quarter. It’s unfortunate for ELF at the moment, but this stock still has the fundamentals, technicals, and Big Money support to move much higher over time.
Last week’s news was certainly rife with negativity. Middle East tensions continued heating up. Oil surged. Statements from Federal Reserve governor Neel Kashkari questioning if and when the Fed will cut rates spooked investors.
I have good news. My data still points to a strong market, so I expect higher prices in the coming months, with the requisite ups and downs along the way.
The key is whether there has been a shift in Big Money flows, and the short answer is no.
Even with last week's choppiness, my Big Money Index (BMI) continues to meander sideways after falling from overbought in February. It dipped three points from the prior week to 71.7, which is not even its lowest reading during this sideways shuffle. That came back on March 18 at 70.9.
The market has stayed strong. The latest dip rattled some nerves, but it's really just a blip in the much larger uptrend.
Source: MAPsignals.com
As you know from previous updates, the BMI fell from overbought due to less unusually large buying rather than increased selling. That didn't change last week, either. There was still no visible increase in big selling signals (red bars).
Source: MAPsignals.com
One crucial factor in determining those unusual sell signals is whether a stock or ETF breaches an 11-week low on abnormal volume and volatility. There's nothing to speak of in that regard.
We get further confirmation looking at how buying and selling is distributed by market cap. Buying still outnumbers selling across the board, and substantially so in small- and mid-cap stocks – the growth stocks.
Source: MAPsignals.com
And we see the same story in the sectors. Energy remains at the top of the rankings, while Technology has slipped to fifth. Energy buying is quite strong, as we would expect, but tech has fallen in the ranks not because of weakness but because it is less strong than before. Big Money buying has simply slowed.
Source: MAPsignals.com
I see no clear price “breaks” to worry about in any of the sectors. And with unusual buying still outweighing unusual selling, the picture remains one of strength there as well.
We’re due for a pullback, maybe even overdue, but 70% of all Big Money signals in my system are still buys. That’s good.
The next earnings reporting season gets going Friday when several of the big banks release their results. This period after last quarter’s reports and before the new round begins is frequently choppier because there are fewer catalysts to push prices higher.
I see last week’s pullback as normal and healthy. Whether it continues or not, the market remains strong.
Either way, we know we’re in the highest-quality stocks in the market – including ELF – and we know pullbacks mean opportunities to add more best-of-the-best companies. I’m watching a few stocks now and will let you know when it’s time to make our next move.
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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