While that’s yucky, it’s a good idea to see which sectors were impacted the most. That’s why I look at Big Money buying and selling to give me insights. Big Money activity looks at outsized buying and selling in stocks and ETFs. As I’ll show you, it can reveal a lot.
First, let’s begin at the top and work our way down. Let’s visualize the flow of Big Money and the current trend. To do that, below is the MAPsignals Big Money Index. The blue line has been lifting – pointing to a bullish setup:
You can see that the BMI has broken out to a multi-week high.
Inside of the BMI are the daily buys and sells. Below you can see why IWM has been range bound. It’s a lot of rotational action. I’ve shaded this action:
But let’s go deeper. Inside of all of those buys and sells are sectors. And each week, I look at what’s getting bought and sold in a big way.
To visualize it for you, below are the total counts of buys and sells in stocks last week, September 20 – 24. If a group saw outsized activity, it’s shaded in yellow. Those are the sectors that saw 25% or more of its universe either bought or sold.
Seven sectors felt the pain: Financials, Communications, Discretionary, Industrials, Staples, Materials, & Utilities:
That’s a lot of selling. The only area that saw outsized buying was Energy. Additionally, there was healthy buying in smaller-cap companies.
So, the question remains, is there an opportunity here? Well, remember when I told you how nasty Monday’s selloff was? Check out this following chart which isolates big sell days. I’ve used SPY as the overlay.
I’ve shaded Monday’s selloff and prior big sell days in orange. Do you notice anything?
Source: MAPsignals, FactSet
As you can see, big sell days tend to line up with near-term lows for stocks. I even discussed this last week prior to Monday’s rough ride.
The opportunity I’m seeing in the data is a bullish undercurrent in small-cap stocks…the quality kind. Those are the companies with healthy sales and earnings growth.
It wouldn’t surprise me one bit to see small-caps outperform mega-caps in the near-term.
Here’s the bottom line:
Last Monday saw chunky selling across the board. But those big sell days tend to setup a near-term bounce.
A rising Big Money Index is new data. And it’s being led by quality buying in small-caps. That’s where I believe the near-term opportunity lies.
Disclosure: the author holds no position in SPY, QQQ, DIA, or IWM at the time of publication.
Learn more about the MAPsignals process here: www.mapsignals.com
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This article was originally posted on FX Empire