The next big market move may not come from the stocks everyone is chasing today…
Listen to the audio version of this article (generated by artificial intelligence).
Imagine you’re watching an NBA basketball game, and LeBron James is just lighting it up. He fired six shots in a row. The game is close. And LeBron is clearly preparing to take another shot.
What are the chances of him doing so?
In basketball, players and coaches often talk about the “hot hand.” The idea is simple: If someone makes several shots in a row, people believe they have a greater chance of making the next shot.
Sometimes, this instinct may be correct.
But often, our brains take what just happened and assume it will continue to happen.
This is a simple example of Recency bias.
Even if you don’t know the technical term, you must have tried it.
Conduct your annual performance review at work. Your supervisor will likely remember a lot of the work you did over the past month. But they may not remember many of your accomplishments from nine months ago.
As a result, you are more likely to be judged over the past month than over the past year.
This same bias can affect your decisions as an investor. It can have a significant impact on your investment portfolio.
The human mind is a wonderful tool for creating art, music, language, and engineering.
But it can be a terrible investment tool.
The more you know about how your mind works, the “bugs” within it and how they work against investment performance, the more you can develop strategies to reduce their negative effects.
Let me help you with that.
per day Market 360I’ll show you how recency bias can blind investors to the next big move in the market. Then I will explain how My Precursor Intelligence System It helps me look at what a stock has done recently and focus on signals that could point to the next direction for institutional funds.
The risk of investing in a rearview mirror
In investing, recency bias occurs when a stock has momentum, either up or down.
If a stock has been rising for the past six months, people naturally think it is likely to continue rising.
The opposite also happens. If the stock doesn’t rise in six months, it’s unlikely to change any time soon.
On a broader level, if it’s been years since the last bear market, investors will likely believe it won’t come soon.
You can see this everywhere in the market today.
A stock runs for a few months, and investors assume it will continue to run. The stock declines, and they assume the story is broken. A sector falls out of the headlines, and they assume the opportunity has passed.
This is an investment in a rearview mirror.
It can be expensive.
When AI chases the rearview mirror
takes Oracle Corporation (ORCL), For example.
Earlier this year, Money.com reported on Danelfin, an AI-powered stock-picking platform, which it says identifies stocks likely to outperform in the next 90 days. At the time, Danelfin’s top 10 stocks included Oracle, along with other well-known names such as… Meta Platforms, Inc. (dead) and Roblox company (RBLX).
On the surface, it made sense.
Oracle has become one of the favorite plays for AI infrastructure on Wall Street. Investors have watched the stock rise, and many assumed the recent momentum would continue.
This is recency bias in action.
But my country B system He was telling me something different.
There were warning signs flashing that the ownership structure was changing. In other words, large institutional investors started to exit while the crowd was moving in.
Ninety days later, Oracle stock had fallen 32%.
Not only that, but the Meta indicator fell by 12%. The price of Roblox fell by 25%.
For this reason, recent performance is not enough.
A stock can look strong on the surface while deeper signals are already starting to weaken.
The opposite can also happen.
Last December, most investors were not placing GE Vernova Company (Jeff), a company that builds the power infrastructure needed by artificial intelligence data centers, is on the list of the most important ones AI shares. They focused on the obvious names — software companies, chip makers, and the usual Big Tech leaders.
But the PI was reading a different signal.
Nizami showed that institutional investors were quietly accumulating GE Vernova.
Since then, GE Vernova stock has risen nearly 70%.
This is the power of looking beyond what just happened. Recency bias keeps investors focused on yesterday’s winners. My PI system It is designed to help me identify where big money might move next.
A stock can look dull, neglected, or temporarily out of favor before institutional money starts moving in.
That’s why I developed my inventory classification system in the first place.
Instead of watching a stock chart and guessing what’s coming next, my system runs the numbers. It analyzes thousands and thousands of data points, including fundamentals and quantitative signals.
And now with Precursor intelligenceI’m able to go deeper.
PI is designed to help me identify the early signs that often appear before any big move. It helps me look beyond what has already happened and focus on what can happen next.
This is the key. Because if you wait until everyone sees the same opportunity, it may already be too late. By the time the crowds gather, the easy money may already be gone. In some cases, big money may already be headed toward the exits.
But you don’t have to let your future be governed by recency bias or any of that Other biases we’ve covered.
All you need are the right tools. That’s why I built PI
Make my system work for you
My system is not emotional. He is not impatient. Don’t become greedy. A stock should not continue to rise just because it has risen recently.
It is simply looking for the same types of initial signals that have appeared before many big stock moves in my career.
With the second quarter earnings season getting underway very quickly, I think this type of visibility may become even more important.
In my new showI explain why July 23 could become a pivotal day for the market and why I’m watching it closely.
I’ll also show you how PI works and reveal several stocks that my system says could be next in line as institutional money makes its next move.
sincerely,
Louis Navellier
editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor owns, directly or indirectly, the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations contained in the article described below, or otherwise mentioned:
GE Vernova (Jeff)
