Heresy! For The First Time In 16 Years, Buy-The-Dip Has Failed

Heresy! For The First Time In 16 Years, Buy-The-Dip Has Failed

Way back in April, two months after investors too young to remember a time when two-way price action was a thing learned the hard way that stocks sometimes go down as well as up, BofAML floated a heretical theory: "Buy the dip" was failing. "In 2017, we showed how a simple trading strategy of holding cash and buying any 5% dip in S&P futures until either the market retraced or 20 trading days passed outperformed the S&P on a risk-adjusted basis consistently since 2014", the bank wrote,
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4 thoughts on “Heresy! For The First Time In 16 Years, Buy-The-Dip Has Failed

  1. H, this was a great piece. The denial about the effects of FFR tightening and QT on the equity market dynamics was and is always so pathetic. I get especially annoyed by some of the authors on SA who proclaim that we are x months into QT and the market has still rallied to all time highs.

    They are surely intellligent enough to understand the latency effects of liquidity contraction on complex systems like the equity market. They surely understand how income statement dynamics and cash flows are affected by interest rates over time. It is all a bull sales pitch (pun intended), and it is all very sad. Everyone exploiting everyone else for greed and commissions and “business”. The unwitting retail investors are the ones who lose out when all is said and done. I can just see them selling out in panic these last few weeks. Very very sad…….

    NVDA brings back not so fond memories of the dot com bubble pop, although that was even more brutal. Bankruptcies galore……. It is really hard to believe that many of the very young investors don’t know of anything else but upward momentum and BTD, but thanks to Yellen and Bernanke, its true!!! Long live “trickle down” economics 😉

    “There you go. How many times have you been warned over the past two years that once the marginal, price-insensitive bid from the benefactors armed with the printing presses starts to fade, risk assets will lose their luster? And how many times did some newly-minted “asset manager” with a bunch of Twitter followers tell you that QE wasn’t behind ongoing risk asset inflation?”

    Thanks as always for your great work……

  2. Soon a version to be over at the SA table with ensuing batshitery from the gasping guppies in the fishbowl overwhelmed by the algae created only by their own poop.

    One thing I so much like about this man’s efforts is how he rallies forth the lunatics. It’s like gigging frogs; shine the light and….

  3. Buying the dip is dead. Long live buying the dip. Investing in well-run, well understood companies, preferably collecting dividend income and better yet DRIPping, and enhancing your positions on weakness I dare say will never ever fall out of fashion. Think of it as adding to a collection the day after Christmas.

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