How To Visualize A Market Dip

So that got me thinking. If September is usually negative, is there a way to capture the dip? Well, here’s my way of visualizing a market dip.

I’m all about data…especially Big Money data. My favorite indicator is the Big Money Index. It’s my way to tracking what big institutions are likely doing in stocks.

When it falls, expect red markets. When it rises, get the rally hats out:

Source: www.mapsignals.com

You can see that it’s in an uptrend because summer-selling has been slowing.

Inside of the BMI are the daily buys and sells. Below you can see how buying has been increasing lately. That’s why the BMI is perking higher. I’ve circled the increased buying:

Source: www.mapsignals.com

But since this article is all about a market dip, look how using MAPsignals data can help us visualize a market dip.

Below is the same chart, but I’ve isolated those big red days. Those are days when there’s a lot of selling in stocks. Look:

Source: www.mapsignals.com

Notice how each of those big red sticks marks the low for the market? That’s the S&P 500 (SPY ETF) I’m using as the market gauge.

But more importantly, look at the 2 week forward performance of SPY after those big sell days. It’s mega juice:

Source: MAPsignals, FactSet

That’s how I visualize a market dip with data. But what’s cool is we can see the same similar patterns in ETFs. Below are the daily Big Money buys and sells of ETFs according to MAPsignals. I’ve outlined big red sell days:

Source: MAPsignals.com

Visually it looks like the stock sells chart. And for good measure, here’s the 2-week return for all of those instances above.

Source: MAPsignals, FactSet

Talk about a cool way to see a market dip through the eyes of data.

Here’s the bottom line:

Investors and traders like to talk about buying the dip. And it’s a real phenomenon. Recently, we can see that big sell days for stocks and ETFs have been dips to buy. Will that be the case in the future? Only time will tell.

But, one thing should be apparent. Data can be helpful to a solid trading process.

Disclosure: the author holds no position in SPY, QQQ, DIA, or IWM at the time of publication.

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

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