Oversold Big Money Index (BMI) – March 13, 2025
Question: If you haven’t bought the dip yet, what are you waiting for?
Answer: An oversold Big Money Index (BMI).
We’ve got a lot going on with equities:
- Tariff worries spook investors
- Open questions on the impacts of DOGE
- And extreme economic uncertainty
All of these worries we have no control over. That’s the unfortunate news. Everything is unfolding in real time.
Don’t fret.
There is forced selling occurring under-the-surface of the market. We’ve seen this playbook before…and there’s a measurable opportunity coming soon.
Today we’ll unleash 2 powerful studies that will prove that over the coming days and weeks, you’ll want to be buying high-quality beaten down stocks.
Now I can’t tell you that the lows are here yet…in fact, if we’re going to reach the rare oversold zone, prepare for a bit more downside.
Just don’t zip your bear suit on too tight.
Forced selling prefaces forced buying.
Don’t wait for the crowd to give the go signal…by then the train will have left the station.
Capitulation Spurs Largest Equity Outflows Since 2022
It’s been years since we’ve seen this level of carnage.
As hedge funds and money managers de-gross equity exposure, markets have nowhere to go but down.
On Tuesday, we saw 464 discrete outflows in stocks. That’s pure capitulation and the highest single day of selling since June of 2022.
Below details our daily equity flows chart. When you see red bars of this magnitude, you can be assured that risk is being taken down forcefully:
This graphic may have your mood turning sour. But please know that these deep risk-off moments tend to tee up breath-taking rallies.
Don’t take my word for it. Let’s study history!
Yesterday, we put out an out of phase post highlighting this very study. If you’d like to listen to Jason Bodner dive into detail – check it out.
Back to 1990, including backtesting, we’ve had 41 prior days registering 464 outflows or more. Keep in mind, the further back we go, volumes are less as algorithmic trading was less established.
So, all events occurred from 2007 onwards.
Before you take the bear bait being fed to you in the media, consider the following signal study.
Whenever we see 464 outflows or more, the S&P 500 absolutely surges with:
- 3-month gains of 6.7%
- 6-month jumps of 9.6%
- 12-month ramps of 21%
- 24-month rippers of 36.1%
If that doesn’t excite you, here’s the study including 2009 through this week.
Stocks have never been lower at 9, 12, and 24 months later:
Folks the time is now. You should be legging into all-star stocks.
But I understand if that’s not your cup of tea. If you’re still thinking of taking the wait and see approach…
There’s a decent shot we encounter a rare oversold Big Money Index (BMI) in the coming weeks.
Here’s what you can expect.
What Happens Before and After an Oversold Big Money Index (BMI)
Years ago we created our most popular indicator, the BMI.
It is a slow moving-average of money flows. When the yellow line of truth is plunging, wide-spread dumping is occurring.
Our latest reading puts it a hair below 40%…one of the weakest breadth readings of 2025.
But as we highlighted earlier, the level of destruction is immense right now. Which means we could be on our way to an oversold signal…something that last occurred in October of 2023.
Back then we yelled to the dismay of the crowd that a mega rally was coming. We offered 2 bear-killer signals back then.
We were convinced simply due to historical analysis. But let’s first visualize the last 10 oversold Big Money Index (BMI) episodes.
If you look closer, a golden opportunity can be spotted:
Rest assured, tomatoes were flying at the stage when we made that call.
But we are disciples of data and analysis.
The evidence back then said to buy stocks with both hands.
Today’s environment echoes that narrative…only we’re a couple weeks away from the green light.
What can you expect if we are to reach an oversold BMI? I’m glad you asked!
Stocks are no match for a falling Big Money Index. Back to 2009, we’ve reached oversold just 13 times.
There are 2 big takeaways:
- First – large, mid, and small-caps suffer in the few weeks leading to an oversold reading. It’s quite painful as correlation goes to 1
- Second and most important – Once we are truly oversold, a breath-taking rally ignites
Below reveals one of the best buy the dip setups you’ll ever find:
If you’ve been chipping away at stocks during the recent turmoil, kudos to you!
History proves that you want to be taking the other side of the crowd in times like these.
But if you’re waiting for the mother of all buy signals…you just might get your wish.
Just note, an oversold BMI rarely lasts long…and often triggers a crowd-stunning rally.
Some of my top trophy case scoops came during these brief windows.
So, how can you prepare for this?
If and when we reach a rare oversold BMI, you’ll want to bet on the outliers loved by institutions…that’s where our process shines.
Don’t get lost trying to keep track of daily headlines…
Follow the money flows.
Lastly, join me April 10th at 10am ET at the Wealth365 Summit – as I present: Using Money Flows to Forecast the Best Stock Performers in 2025.
You won’t want to miss it.
Author: Lucas Downey
