Mom called me: "How are you feeling, honey?"

Lying, I said, "Fine."

"You don’t sound fine."

I opened up and told her I was stressed. "I hit roadblocks, both personal and business. Family issues are flaring, uncertainties are getting to me, and this whole COVID thing is just wearing me down … I feel life's vice tightening." I said, exasperated. 

"So, what's your favorite color?" she asked.

"Huh? Why?"

"The color?"

"Ocean turquoise," I said.

We hung up, and then a few days later she called back to ask me how I was: "Are you feeling better? Because you should be."

Me: "Funny enough I am! The roadblocks opened. The personal issues calmed down. And the vice is loosening."

"I knew it!" she said. "I repotted your plant."

Forty-five and a half years ago, I was born in North Miami General Hospital. Someone gave my mom a plant that day. And by some horticultural miracle, it's still alive. But oddly enough, my mom swears that, when I get sick, it loses leaves, and when I am thriving, it gets lush. She's made these observations for literally my entire life. The day she called me, she noticed my plant, which she unironically calls "Jason," was constricted in its pot. "The roots were compacted," she told me. So, she asked me my favorite color to buy a new roomy pot for Jason to move into. 

She proudly sent me a picture of Jason in his new home. This is the same plant that arrived in the hospital room the day that I arrived in the world. She said: "You’re even blooming a new flower if you look carefully …"

Look, I consider myself a man of science. I need hard evidence. It allows me to have conviction in my decisions. But as a scientist, I concede that there is vastly more about the universe I don't know than I do know. Therefore, I concede that there may be something to this anecdotal connection between me and my plant self – if not scientifically explainable, then by some other means I do not understand.

The bottom line is: it appears we are connected. Maybe the plant dictates me more than I dictate the plant. The analytical side of me says it's likely coincidence. But maybe the real explanation is beyond my grasp because I just don't know about it. 

But what I do know is that, when it comes to stocks, I see the deep connection that most don't. It's because I spent decades studying it. I got my hands dirty, read countless books, fiddled with equations, and built algorithms. Just like me and "Plant Jason," the stock market has an unnoticed alter ego … Big Money.

Market news always focuses on the major averages. You ever notice in the car that, when you catch a market update on a news minute, you get the Dow Jones Industrial Average first, then the NASDAQ and S&P 500

The Dow is a throwback from a different time when 30 stocks were a great representation of the market as a whole. Now it's much more logical to look at the 500 stocks in the S&P than just 30. While the Dow often still gets top billing, when the market surges, news stories only have a moment to ascribe a reason. Usually it's a headline like: "coronavirus vaccine progress" or "trade deal talks." 

But the "market plant" is actually out there. It's just under the surface. The reasons are not what the news says. The reason is one thing only: Big Money.

Recently, market strength has renewed its vigor. I have noticed my own accounts gently drifting higher in recent days after what seemed like weeks of hovering near just shy of pre-COVID highs. In recent days, the accounts surged to new highs along with the indexes.

That may feel confusing because the narrative has been how overbought we've been. Stocks have been in the longest overbought period in our 30 years of backtested history. You may want to react by asking, "Is it a good time to sell?" As the Big Money Index (BMI) drifts lower, you might think you can get in front of a big move down because the market must pull back at some point, right?

Chart showing the performance of the Russell 2000 index and the Mapsignals Big Money index
www.mapsignals.com

The answer is yes, it must, but it won't necessarily be tomorrow, next week, or even next month. That answer lies in what Big Money is doing. And despite a falling BMI, my data indicates that buying is starting to pick up again. And if that happens with no accompanying selling, then the BMI will start to go higher again. Remember, the BMI is a 25-day moving average of buy versus sell signals. If selling evaporates and buying surges, the BMI will start to rise.

From this chart of 2020, it's clear there has hardly been any selling since April. And hard as it may be to see, the green bars at right are increasing. A green bar indicates more buyers than sellers in a day. A red bar means more sellers.

Chart showing big money buy signals
www.mapsignals.com

And what is Big Money buying? I have noted that tech and health care were the engine of the rally, and then they took a break. Well now tech is back. Last week, we saw a huge inflow into software stocks and other big-tech names. But the big winners this past week were discretionary names, as 44% of the sector stocks I track saw buy signals – that's a lot. As we draw closer to the promise of a vaccine and a return to normal life, travel stocks and "real-world" stocks are getting some attention again after being written off for dead in March. Staples and industrials also saw notable buying.

Table showing big money buy and sell signals by sector
www.mapsignals.com

Look, the BMI may be falling, but that doesn't mean the market will. Just as "Plant Jason" was telling mom it needed more space, Big Money is saying it wants stocks. The real reason for a market's moves are not on TV – they're in the market itself.

My mom made the same thing clear when she taught me how to drive: "Never mess with a bus or a truck." It's simple: don't fight Big Money – follow it.

The Bottom Line

We (MAPsignals) are bullish on high-quality U.S. equities in the long term, and we see market pullbacks as areas to pick up great companies. 

Disclosure: The author holds a no positions in the securities mentioned at the time of publication.

Disclaimer