Big Money Index Could Reach Oversold Within Weeks

Equities have fallen to YTD lows.

Our biggest indicator is flashing the red light.

The Big Money Index could reach oversold within weeks.

It’s been over 2 years since the Big Money Index (BMI) reached oversold.

October 2023 was when our North Star finally reached the ultimate green zone. Back then we told you 2 bear killer signals are flashing.

That signal came through as markets took off, and all-star stocks surged.

While we aren’t technically oversold yet, we have broken key support levels in the S&P 500…and our BMI is falling hard day after day.

Over the near-term expect increased volatility. That said, you’ll want to start picking away at beaten down growth stocks.

Let’s unpack the data and understand why stocks are struggling.

Then I’ll offer up a few technical areas to consider for the S&P 500.

Now is not the time to be fearful.

It’s time to get a gameplan.

Oversold markets are some of the best buying opportunities you’ll ever get.

Big Money Index Could Reach Oversold Within Weeks

The S&P 500 fell to YTD lows yesterday.

At 6624.70, the large-cap benchmark just broke below its 200-day moving average. That’s the first break below this support level going back to a year ago:

Last March was a tough time for markets as April saw the Liberation Day crash.

Now, I’m not predicting another meltdown of that magnitude.

However, our trusty Big Money Index (BMI) is falling hard…suggesting heavy outflows recently.

This morning, the BMI broke down to 49.7%, the lowest level since early December:

The overall trend is what’s important. Stocks breaking down day after day reveal that supply is rising and demand is falling.

One look under the surface shows how outflows are picking up:

Rising oil prices, rising interest rates, credit worries, and war are causing investors to hit the sell button.

Tech and financial stocks are feeling the brunt of the weakness while energy stocks are under accumulation.

If this selling persists, keep the following datapoints on your radar.

2 key oversold BMI readings are 35% and 25%.

A 35% BMI indicates heavy outflows and initial oversold conditions. This is the area we breached during the Liberation Day crash and we prepared you for an unthinkable rally.

A 25% BMI indicates extreme oversold conditions like COVID-19, 2022, and October 2023. At the COVID-19 bottom in March 2020, the green light flashed and we told you to buy it all.

When it matters most, the Big Money Index will lead the way:

No one has a crystal ball. We can’t possibly know the future.

However, we can study the past…and we’ve learned that oversold conditions don’t last forever.

If we do approach 35% or 25% on the BMI, here’s a gameplan of what to expect.

Analyzing prior episodes when the BMI fell to 35%, the S&P 500 typically reaches a correction zone (11% – 15% drawdown from peak).

If that’s the case, plan for the S&P 500 to approach 6200 or lower, roughly 6% lower than current levels:

Now let’s look at a BMI breach of 25%. This indicates extreme oversold conditions.

These are never fun and are ultra rare.

These typically occur once every 2 years. The S&P 500 would likely break below 6000 if this were to happen:

Anyone who’s been with us during extreme oversold conditions can attest to how fast markets often recover…it’s paramount to study money flows during these events.

I don’t say this to scare you…

I say this to prepare you.

Traders need to be armed with cutting-edge data as markets fall under pressure. Our BMI has led us in the past and it’ll lead us in the future.

You can count on that.

Next week on March 27^th, we are hosting our first ever webinar that will unpack what we learned in Q1 and what to expect in Q2 and beyond.

This is an important event and I hope you’ll attend.

Don’t follow the news…follow the flows.

Get started today.

Our PRO subscription allows you to spot daily flows and access our weekly Outlier 20 report.

This is the report that has found EVERY SINGLE ONE of our Outlier stocks.

Professional money managers and RIAs looking for additional portfolio solutions including ETF flows & ranks and your own Portfolio Tracking tools, please reach out about our Advisor Solution and Emerging Advisor Program.

AND as a bonus, watch Jason Bodner and I discuss 3 oversold stocks we like right now. We cover historical studies, too. It was a fun chat!