My mom’s biggest lesson for me when I was learning to drive was: “Never mess with a truck or a bus!” In other words, if you’re driving a car, you don’t want to fight the big guys.
And the same rings true for the market. To make profits, you can’t fight the big money. You have to follow it instead.
Now, most people have no clue what the big boys are doing until it shows up on CNBC. But by then, it’s too late. The major moves have already been made.
So wouldn’t it be nice to get a heads-up on these big-money movements before they actually happen?
Consider this… We all know what to do on the roads when we see a traffic light. If it’s green, we go. If it’s yellow, we slow down. And if it’s red, we stop.
Well, what if the market had its own “traffic light” signaling the big money’s actions?
The good news is, it does. But it’s not easy to see. That’s why I’ve dedicated my life to helping you spot it.
So today, I’ll reveal what it’s signaling today – and what it means for our game plan…
Our Stock Market Traffic Light
Remember, I spent nearly a decade and hundreds of thousands of dollars developing an “unbeatable” stock-picking system that follows the big money’s movements.
And I used my experience from nearly two decades at prestigious Wall Street firms – regularly trading more than $1 billion worth of stock for major clients – to make sure it’s highly accurate, comprehensive, and effective.
It scans nearly 5,500 stocks each day, using algorithms to rank each one for strength. But it does more than just look at individual stocks. It also looks at the big-money buying and selling in the broad market.
This is the data powering my system’s Big Money Index (BMI). And the BMI is so accurate that it forecasted the market’s bottom in March almost to the day.
Now, today, I want you to visualize the BMI a little differently than usual. I want you to think of it as our market traffic light. And right now, it’s flashing red…
As you know, when the index dips to 25% or lower, sellers have taken the reins, leading the markets into oversold territory. And when it hits 80% or more, it means buyers are in control and markets are overbought.
It’s simple… Green means buy. Yellow means to be patient when buying. And red means we stop buying.
So at 87.5%, we’re overbought and in the red. And we’ve been stuck in this category since May 6.
Now, prior to May 6, there were 19 overbought periods since January 1, 1990. The average length of these overbought periods was 20 trading days, or roughly one calendar month.
So one might have expected that around a month after the market went overbought on May 6, stocks would start to pull back. And we have come down from our overbought highs, which means big money has been slowly trickling out of stocks.
Yet, the traffic light is still flashing red. In fact, this market is just days away from breaking the record for the longest overbought period ever of 65 days.
But how can the market stay so overbought? The answer is simple: There is no selling.
As I told you on Friday, selling has flatlined in multiple sectors. You see, while big-money buying is slowing down, sellers are nowhere to be found. And when there are no sellers, stock prices don’t fall.
The bottom line is: This red light is telling us to stop buying most stocks for right now and stay patient. And we don’t want to go against it.
However, even though these overbought conditions could last a while, it doesn’t mean opportunity isn’t out there…
Two Sectors to Bet On
While waiting for the inevitable pullback, in the meantime, we can take advantage of two sectors that could rise higher in the coming weeks: tech and health care.meantime, we can take advantage of two sectors that could rise higher in the coming weeks: tech and health care.
Many of the biggest tech and health care companies reported positive earnings last week. And we think that’ll continue. So expect to see some sharp rises in these sectors.
If you’re looking for some short-term action, consider buying the Invesco QQQ (QQQ) exchange-traded fund on its next drop. It holds over 50 stocks in infotech and health care.
Any dip in QQQ should be short-lived. And it’ll likely pop on more positive earnings reports in the health care and tech sectors. Just be sure to position size appropriately, and don’t bet more than you can afford to lose.
In the long run, we’ll continue to follow our big-money “traffic light” and patiently look for prices we like when adding stocks.
We’ll be able to ride our winners, while we keep cash on hand to pick up high-quality stocks on sale.
So no matter what, we’ll execute our game plan…
Patience and process!
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Jason Bodner
Editor, Palm Beach Insider
P.S. No matter what the market does next, you’ll want to be prepared to grab high-quality stocks at a discount.
That’s where my “unbeatable” stock-picking system comes in. It’s already given my Palm Beach Trader subscribers triple-digit winners like The Trade Desk… SolarEdge Technologies… and Veeva Systems.
And it’s already targeted five more stocks we believe can do even better. So if you want to take advantage of these market conditions, click here to learn more…