The market is a winner-take-all game… just like poker.
If you watch professional poker players on TV, you can see this happen in real time.
Everyone starts with the same amount of chips. Over time, the good players see their stacks rise, while the worse players’ stacks fall.
The chips have to flow somewhere. In order for someone to win the game, someone else has to lose.
The market is the same way…
Money flows from winners to losers. And like poker, you need to know when to hold them… and when to fold them.
The stocks you want to hold are those crushing the market. And even in today’s overheated market, there are still some winning hands.
Today, I’ll tell you what it is…
Big Money Is Drying Up
In the market, the stocks in your portfolio are your hand. And big money is the poker chips on the table.
I’ve spent my life developing a system to identify which stocks those poker chips are backing…
Longtime readers know my system scans nearly 5,500 stocks each day. It uses algorithms to rank each one for strength.
But my system also looks at the big-money buying and selling in the broad market through its Big-Money Index (BMI).
Right now, the data shows the big boys are taking money off the table…
Now, when the index level 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.
After peaking on June 22, the index has dipped. Which means big-money buying is slowing down.
Broadly speaking, I’m wary of buying at these levels.
But while the total number of stocks getting big money is falling, a select few are winning hands. They’re taking all of the chips.
And there’s one sector that’s doing better than all the others…
Where to Place Your Bets
Technology is the runaway player racking up nearly all the chips.
While big money is starting to exit stage left, it’s still driving the tech sector to new highs.
Over the past month, the S&P 500 is down 1% and the Dow is down 4%. Meanwhile, the tech-heavy Nasdaq-100 is up 7%.
We track big money going into all stocks. And for months, my system has said to bet on technology.
Just take a look at the chart below. It shows the percentage of big money going into each sector.
Nearly six out of ten stocks seeing big money buying are in the tech sector. Those are the players to bet on.
Not only is big money flowing to tech… the sector is also crushing the broad market.
In April, the average tech stock gain was over 9% compared to about 3% for the S&P 500. And in May, the average tech stock averaged a 14.2% return… compared to about 9% for the S&P 500.
So if you want to build a winning hand, you should look at tech stocks.
One way to get broad exposure is through buying the Invesco QQQ (QQQ) exchange-traded fund… It holds a basket of tech stocks with heavy exposure to information technology and telecommunication companies.
If you want to have success in poker and stocks, you need to play the odds. And right now, they favor tech stocks.
Patience and process!
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Jason Bodner
Editor, Palm Beach Insider