Monday’s Selloff Was Extreme, What To Expect Going Forward

By now I’m sure you’ve heard how Monday July 19^th was the single largest day of stock selling since the pandemic low. Based on my data, that is true.

So, today I’m going to show you what extreme selling looks like in terms of Big Money. Then, and more importantly, I’ll tell you what it means for stocks going forward. Well, I’ll tell you what history says we should expect.

So, first, let’s take a look at the daily Big Money Buys and Sells chart. These are the daily tally of buys and sells. Green bars are total buys on the day. Red sticks are sells.

Below I’ve circled what’s important. Monday was the largest day of selling since the pandemic:

Now, that should raise some hairs on investors’ backs. But look how those big red days tend to line up with local lows in the market.

Well, I also looked back to see how the S&P 500 (SPY ETF) performed after each of those red days. Because to the naked eye it looks like big red days are actually bullish…at least near-term.

So, here’s the 1-week performance of the S&P 500 (SPY ETF) after each of those big red days. Notice anything?

You should notice how markets tend to bounce after nasty sell days. And that makes sense. When everyone’s selling, it’s probably not the best time to be getting bearish. We’ll see if this latest bout of selling leads to a rip-roaring market. Odds say they will.

So let’s wrap this all up.

The bottom line is this: This time last week, the markets looked vulnerable. The Big Money was indicating that sellers were quickly gaining. The climax of selling came last Monday. Based on history, it says to expect a near-term rally.

As I said last week, use pullbacks as opportunities to shop for amazing stocks on sale. Summers are notorious for low liquidity environments and increased volatility. Those can be opportunities for the patient.

Disclosure: the author holds no position in SPY or the S&P 500 at the time of publication.

Learn more about the MAPsignals process here: www.mapsignals.com

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