Famed American surfer Laird Hamilton once said, “If you don’t understand the wave, you can’t respect it. And if you don’t have respect, it’s only a matter of time before the ocean teaches you to get some.”
The same can be said of the market. Like the ocean, it moves in waves. Some are small, and some are large. And every now and then, two powerful waves combine to form a massive tube—the “Big Wave.”
Like surfers, investors need to understand how waves work. If you don’t, you risk getting toppled by them rather than riding them to the top.
So today, I’ll share with you how I track big waves of money in the stock market. And by following these waves, you can know which sectors are going higher or lower in advance…
How I Learned to Track Big Money
If you’ve been following the Daily, you know I spent nearly two decades on Wall Street—including at Cantor Fitzgerald as partner.
While there, I was one of only a few hundred people in the world with the ability to trade $1 billion or more for big financial institutions. So I was in a unique position to track where the big money was really going… in real time… in a way almost no one else could.
You see, when institutions move that kind of money into one stock, they can’t buy it all in one go; they have to buy it in chunks. This leaves clues that only someone like me can detect—because I’ve been on the other side of that trade.
And this knowledge allowed me to build an “unbeatable” system that tracks what the big money is buying. It scans nearly 5,500 stocks every day… and uses 80 complex algorithms to score and rank each one of them for strength across 29 factors.
But all you really need to know is that my system looks for the best of the best stocks that institutions are likely buying by the truckload.
Here’s why that’s important…
Big Money Flows Into Outliers
Big institutional money accounts for about 70% of all trading volume every single day.
These massive investors collectively manage trillions of dollars. They have multimillion-dollar budgets and a small army of professional analysts conducting research. And when they start buying a stock, they lift the price higher and higher.
These “outlier” stocks—the one percent of the one percent—are where the big money is hiding out. And if you’re serious about making money, you’ll want to own outliers.
You see, a 2017 study by an Arizona State University finance professor found that—over the past 100 years—just 4% of stocks have accounted for nearly all the profits of the market each year.
Now, I spent half a dozen years and hundreds of thousands of dollars to fine-tune my system to specifically spot outliers. And if you’re not targeting these companies, you’re basically wasting your time as an investor.
So where will we find the next outlier? Well, my system is saying mid-cap U.S. equities…
The U.S. Is an Oasis
Remember, big institutions account for 70% of daily trading volume. And these money managers can’t charge fees just to sit in cash. They simply have to put money into stocks.
And right now, U.S. equities are the most attractive destination for investor capital—especially mid-cap companies with little international exposure.
Just take a look around the world…
Latin America is highly volatile. Europe is dealing with Brexit uncertainty and an overall economic slowdown. And China’s economy is suffering from the trade war.
Among all this geopolitical turmoil, U.S. markets are an oasis in a sea of uncertainty. Plus, with falling interest rates, U.S. equities continue to be more attractive than other securities—like “safe-haven” bonds.
So if you’re looking to take advantage of the wave of capital headed into U.S. equities, consider the iShares S&P Mid-Cap 400 Growth ETF (IJK). It’ll give you broad exposure to mid-cap growth names.
Editor, Palm Beach Trader
P.S. On Wednesday night at 8 p.m. ET, I’m pulling back the curtain on my system… and putting it to the ultimate test.
I’ve invited a panel of outside experts—including the former head of Bloomberg Tradebook… a $2.5 billion asset manager Forbes called “The King of the Quants”… and a Master of Data Science from New York University who’s traded hundreds of billions of dollars for BNP Paribas and JPMorgan.
They’re going to dissect my system under real-world conditions. And I’ll even use it to identify the top stock in each of the hottest market sectors right now: 5G, tech, gold, crypto, and cannabis.