When it comes to investing, you have to check your emotions at the door…
This is hard for a lot of people – including myself. Outside of work, I put a lot of passion into whatever I’m doing… whether it’s writing music or spending time with my family.
But investing is different. I learned early on not to let my emotions influence my trades – no matter how crazy the market gets.
Instead, I follow what the data is telling me. It removes fear and greed from the equation. And it rarely steers me wrong.
And today, it’s telling me that the market is still overheated.
I’ve been a trader for years, and this is one of the longest overbought periods I’ve ever seen. It’s driving a lot of investors crazy.
Now, I’ve been warning of a pullback for weeks. And eventually, we’ll see one.
But I don’t fight what the data is telling me. And right now, it says buyers are coming back into the market.
Today, I’ll tell you what that means for your portfolio…
Big Money Is Coming Back
I’ve been preparing for a pullback for weeks now. The data showed buyers were trickling out of the market. And I was ready to buy with cash on hand.
But over the past three months, every time the market shows signs of weakness, buyers gobble up the dip.
Look, sometimes markets get disconnected from reality. Investors buy stocks at insane valuations. And the fear of missing out (FOMO) creates buying frenzies.
That’s why I created my Big Money Index (BMI). It takes the emotions out of investing.
Remember, my system scans nearly 5,500 stocks each day, using algorithms to rank each one for strength. It also looks at the big money’s buying and selling movements in the broad market as well.
Take a look:
When the BMI dips to 25% (the green line in the chart) or lower, sellers have taken the reins, leading the markets into oversold territory. And when it hits 80% (the red line) or more, it means buyers are in control and markets are overbought.
As you can see above, buying peaked on June 22. It then trended down for a couple of weeks before picking back up this week.
We’ve been overbought for 53 trading days now. Since I started using my system to track big-money moves, the longest overbought period I’ve seen is 65 trading days.
Normally, this type of buying would be unsustainable. But we’re not in normal times.
That’s why it’s best to trust in the data. It keeps you from being swayed by emotion.
We don’t need to worry about the coronavirus pandemic… what the Fed is doing… or if millennials new to day trading are pushing up stock prices.
All we have to do is follow the big money.
We’re Still Positioned to Succeed
Look, I’m not worried about where the market goes next. I just look at the data and adjust my gameplan accordingly.
And that’s why I’ve positioned us to succeed no matter which way the market turns.
If big money keeps pouring in, we’ll sit back and ride our winners to more profits. And when the market pulls back, we’ll have plenty of dry powder on hand to swoop in and pick up our next winners at bargain basement prices.
It’s a win-win strategy. And if you can stay disciplined enough to follow it and keep your emotions at bay, it’ll carry you through any type of market.
Patience and process!
Editor, Palm Beach Insider
P.S. My “unbeatable” stock-picking system earned its nickname because it’s not influenced by emotions. It follows the data to scope out the huge winners that’ll lead you to profits.
That’s how it identified the triple-digit winners in our Palm Beach Trader portfolio, like The Trade Desk, Veeva Systems, and Paycom Software. And it’s already zeroing in on the next batch of outliers.