The Market’s Flashing a Warning Signal

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The Market's Flashing a Warning Signal

By Jason Bodner, editor, Palm Beach Insider

We’ve all seen “CONSTRUCTION ZONE AHEAD” signs while cruising along the highway.

They tell us to slow down and help us prepare for traffic congestion. And there’s often a stiff penalty if you don’t follow them.

The thing is, markets have congestion zones, too. These are instances when the buying starts to dry up – and if you’re not paying attention, your portfolio could get “fined.”

Unfortunately, no one is holding up a sign in your brokerage account saying, “SLOW DOWN! MARKET CONGESTION UP AHEAD.”

But there are still plenty of warning signs that you can look for – especially by following the big-money moves.

Today, I’ll show you why the market is flashing its brake lights… and what you should do next…

Slow Down, Congestion Ahead

When the big money makes a move in the market, it can tell you where the market’s headed next. And sometimes, it’s a warning that there’s congestion ahead you should avoid.

But Wall Street likes to hold an edge over the little guys. So when they make big moves, they keep it quiet so everyday investors can’t pick up on their strategies.

However, regular readers know that my “unbeatable” stock-picking system helps us sniff out these signs.

It scans nearly 5,500 stocks each day. And it uses algorithms to rank each one for strength.

But my system does more than just look at individual stocks. It also looks at the big-money buying and selling in the broad market through the Big-Money Index (BMI).

And the data has been warning investors: “Slow down, congestion ahead.”

Look at how the BMI has been falling recently:

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Now, when the index level dips to 25% (the green line in the chart) or lower, sellers have taken the reins, leading the markets into oversold territory. And when it hits 80% (the red line) or more, it means buyers are in control and markets are overbought.

As I've said before, the index peaked on June 22… and since then, it’s been trending down.

Big-money buying has been slowing down… because it sees a traffic jam up ahead.

Tread With Caution

Just as you shouldn’t ignore warning signs on the road, you shouldn’t ignore the signals that the market movers are flashing. Otherwise, your portfolio could take a hit if you buy at the wrong time.

According to my data, the buying wave has crested, and sellers are starting to regain control.

With these high prices and a pullback imminent, I’m wary of buying at these levels. In fact, I suggest taking profits and readying cash to scoop up shares at a discount.

Stocks will still rise over the long term. But the data says that cheaper prices are just around the bend.

It may take a while, but until the data signals a change, we’re in a market congestion zone, and it’s best to move forward with caution.

Patience and process!

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Jason Bodner
Editor, Palm Beach Insider


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