Market Direction and Stock Trends

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History Says Stocks Are Ready To Roar
By: Lucas Downey | September 7, 2021

• Last week I told how Summer was closing in. And that’s typically bullish for stocks. In other words, the final months of the year are usually strong for stocks.

Well, I did a deeper dive over the weekend to see what we can expect going forward. And it’s not bearish. So, put the bear suits away.

Before I share some market history, let’s first check in on my favorite indicator: the Big Money Index. It’s been ramping in a big way the last few weeks.

When it falls, expect markets to fall. When it rises like now, lean long:


Source: www.mapsignals.com

The BMI is nearing 60%. The important data point is how it’s now in an uptrend. And small-caps are helping out. They went from getting sold to getting bought.

Let me show you what I mean. Below are the daily buys and sells of stocks that I look at. These are the days that make up the Big Money Index. Keep in mind, the BMI is created by a 25-day moving average of buys and sells.

But, check out how selling in stocks has slowed dramatically. The red bars have evaporated:


Source: www.mapsignals.com

With the BMI heading north and sellers taking a vacation, that’s quite a bullish setup. But, what does history have to say about now?

Well, you decide. Below are the monthly returns for September – December from 1990 – 2020. September is historically a red month:


Source: FactSet

Now, look at the final 3 months: October – December. The Santa Claus rally is real:


Source: FactSet

So the setup is this: Big Money activity is decidedly bullish & history is too. If you’re a bull, smile ??

Here’s the bottom line:

The Big Money Index is tracking higher as stock buyers step in. The small-cap selloff has slowed dramatically. But maybe even more important is that we are entering the market green zone. The final months of the year are friendly for the bulls. So, put that bear suit away.

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