Someone once told me something I’ll never forget: “Just come out and say it.” So, here it goes...“stocks are heading lower,” states Lucas Downey of MAPsignals.com.

Do I think the world is ending? NO. Do I think stocks will be cheaper near-term? YES. Here’s why:

Every morning I study our data, looking for stories. It’s my version of a newspaper. I start asking myself questions like: “what’s really going on?” or “is there a shift?”  “What’s coming for stocks?” Every so often a shift begins that says stocks are heading south. Recent action is such a shift. There’s no other way to put it. Brace for more volatility.

That statement may scare some people. But, to us at MAPsignals, this will be another great opportunity to scoop up discounted stocks. That’s how we’ve done it for years. That’s how we’ve won big. So, that’s how we’ll do it in the coming weeks. Let’s look over the data.

Big Money Index Says Stocks Are Heading Lower

We need to start from the top. Where is the Big Money going? Last week we mentioned how the Big Money Index was approaching a red light. We didn’t expect there to be an investing bonus level like we’ve enjoyed in the past. Since that post, the BMI has deteriorated further:

big money index stocks are heading lower

If the Big Money Index could talk it would say: “stocks are heading lower.” There’s plenty more happening so let’s continue…

Stock & ETF Volumes Are Exploding

Daily volumes help tell the real story with stocks. And volumes are ramping up while prices are falling, signaling de-risking. Below is our Daily Big Money Volumes chart. Those big bars circled to the right show big trading activity according to MAPsignals. We measure it by looking for unusually large volumes to simplify. We can see that stocks and ETFs were seeing a lot of increased trading. Tuesday and Wednesday saw a massive uptick in trading:

Stock and ETF volumes are exploding

In short—the BMI is falling while stock volumes are exploding. This is another datapoint saying, stocks are heading lower. Why so? Because when volumes inflate, trends tend to reveal themselves. Recent action simply states that sellers are here. Let’s look.

Below is the Big Money Stock Buys & Sells chart. It plots the daily total of buys and sells in stocks. If selling increases, it will weigh down the BMI. Wednesday was the single largest day of selling since March 4:

most selling in stocks in 2 months

Also, note how buyers were absent too. When the buyers vanish, it’s another tell that stocks will head lower.

very few buyers of stocks

What about ETFs? Is there a story there?

This is where it gets really interesting. Last Friday signaled a bearish data point. There were a lot of ETF buyers. Ironically, that usually signals a near-term peak for stocks. Check it out:

big ETF buying bearish for stocks

Also notice the big red stick:

ETF selling is gaining

 

I hate to be the bearer of bad news, ladies and gentleman, but everything in our data points one direction: lower. Strap on the helmets. It’s going to be bumpy. That means prepare for up days and down days.

Let’s Wrap This All Up

Here’s the bottom line: Stocks are heading lower. This is not the time to freak out and become a sad bear. Nope. It’s natural, needed, and helps refresh the market like the forest floor after a fire. Be a happy bear. See opportunity like us. Get a game plan.

If selling keeps rising while the BMI keeps falling, that’s going to present a great opportunity to opportunistic buyers. At MAPsignals, we buy outlier stocks on sale. Because that’s what happy bears do. MAPsignals is my morning paper with the headline: “Stocks are heading lower.”

The weather section says a storm is likely here. Sellers are whipping up volatility like a nasty thunderstorm. But the calm after is usually lovely and when things blossom again. Smart bears ride out the rough winter, slumbering in the safety of a cave. We’re building our buy list now as we hibernate. We use big pullback days as areas to add to great stocks.

To be clear—we don’t see a bear market, we see a much-needed correction. This is a good time to trim up the fat and sit tight. But don’t sleep too long. Eventually spring season comes. And outlier stocks, like grounded birds, will fly high again.

Learn more about Lucas Downey at MAPsignals.com