The Unsung Hero of the Tech Rebound
The bull market has gone quiet… but remains fierce.
Quiet because the headlines and uncertainty keep investors on edge… the scars from the historic selling just two months ago yet to heal.
And fierce because Big Money – the most important force behind stock moves – is buying in droves.
The S&P 500 isn’t technically back to its all-time highs in February, but it’s close enough. The index has surged 21% since the close on April 8, and a new record high is now just 2% away.
That kind of move doesn’t – cannot – happen without Big Money.
My Quantum Edge system tracks institutional money flows every trading day, creating green bars for unusually heavy inflows and red bars for unusually heavy outflows.
Here’s a screenshot from my system. Notice all that green since the massive capitulation in early April. Also notice how few red bars there are in that box. Big Money is buying… and not selling.
Source: MoneyFlows.com
For context, the right axis is billions of dollars. We’re regularly seeing tens of billions flow into stocks each day, with relatively tiny outflows.
This is a big shift in activity. We haven’t seen such large inflows absent major outflows since back in September and October of last year.
Naturally, we want to know exactly where all that money is going.
My system also tracks inflows in sectors and even individual stocks. Since those April 8 lows, growth sectors like Technology, Industrials, and Discretionary have strengthened considerably after getting hammered in the tariff-induced selling.
Growth stocks don’t lead the charge unless investors believe better times are ahead – that the economy is growing and bigger profit margins are in the cards.
Tech stocks, in particular, are the rocket fuel for bull markets in our digital age, so let’s zoom in even more for a closer look. I dove into the data to see which tech stocks are getting bought, and the answer is abundantly clear.
You may not be hearing much about this, but software stocks are buzzing. Nearly half of tech’s inflow signals since May 12 (when President Donald Trump paused tariffs for 90 days) are in software stocks:
Source: MoneyFlows.com
Now we want to know which software stocks are in the popular crowd.
Here you go… the highest-ranked software stocks in my system, including their Quantum Scores, Fundamental Scores, and Technical Scores.
Source: MoneyFlows.com
Each one of those stocks has at least one Big Money buy signal since May 1, and Paycom Software (PAYC) leads the way with six signals.
PAYC is not just the highest-rated software stock in my system right now; it’s the highest-rated tech stock with an outstanding Quantum Score of 82.8 supported by equally impressive technicals and fundamentals.
Source: TradeSmith Finance
Paycom’s software automates payroll and human resource functions for companies. It was one of the first web-based HR and payroll technology companies in the U.S. when it started 26 years ago. The company has nearly 40,000 clients, 90% of which renew each year.
I recommended PAYC to my Quantum Edge Pro subscribers last December, and ironically, the quant ratings were almost identical to what they are today.
That doesn’t mean it’s been a quiet six months…
But it does mean PAYC’s superior fundamentals remain among the best in the market, which made a juicy rebound probable. That’s why we stuck with it. We’re now up more than 11% – and expecting bigger gains in the future.
Big Money did pause its buying spree that started last fall, as you can see on the chart below. No surprise there given what was going on in the overall market.
But inflows started again in early May with buy signals on four straight days. They hit around PAYC’s earnings report in which the company beat expectations and raised guidance, another nod to the strength of the business.
Source: MoneyFlows.com
This chart highlights something else I see often with fundamentally superior growth companies: Red bars, or sell signals, often mark a low. Those three in April were on the market’s peak selling days, and sure enough, the price (blue line) turned higher almost immediately.
Paycom has moved above our buy limit in Quantum Edge Pro, but the data shows this stock has what it takes to power higher – a strong and growing business, a share price on the move, and the biggest investors on the planet buying.
After Paycom, Intuit (INTU) and Box (BOX) both have five Big Money buy signals since May 1. Intuit is the well-known maker of software like TurboTax, Credit Karma, QuickBooks, and Mailchimp. Box is also well known as a developer of content management, collaboration, and file sharing software. We use it at TradeSmith.
Both INTU and BOX show Quantum Scores in the optimum buy zone between 70 and 85, but INTU’s 77.6 tops Box’s 72.4. INTU also has significantly better fundamentals at 75 versus 58.3. Intuit’s growth is stronger, and Box’s significant debt at 365.6% of equity raises risk.
Software is a great business model. Once it’s designed and built, it’s easily scaled to meet demand and generate higher profit margins. Big Money clearly likes it right now, and smart investors should ride those money flow waves to future profits.
And if you’d like me to analyze any stocks you’re interested in – including running them through my Quantum Edge system and checking money flows – shoot me an email and tell me which ones. You can email me at [email protected]. I’ll go over as many stocks as I can in a video coming soon.
Talk soon,
Jason Bodner
Editor, Quantum Edge Pro
Disclosure: On the date of publication, Jason Bodner held a position in Intuit (INTU), which is mentioned in this article.
P.S. During the “Liberation Day” crash and rebound, my colleague Jeff Clark’s trades went 19 for 25, with 15 double-digit winners and three triple-digit gains.
And yesterday morning, at his exclusive webinar, Jeff finally revealed the powerful strategy behind the success of his premium research service Delta Report.
I hope you were able to attend Jeff’s presentation yesterday. But in case you missed it, TradeSmith is making a replay available for a limited time.
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