This page has been archived and commenting is disabled.

5 Things To Ponder: Buy The Dip Or Market Correction

Tyler Durden's picture




 

Submitted by Lance Roberts of STA Wealth Management,

Obviously, this weekend's reading list is focused on what to do now.  Is this just another "dip" that investors should buy into? OR, is this the beginning of the long overdue intermediate term correction or a "mean reverting" process?

I addressed the issue of potential support levels for the current correction in the post earlier this week. The problem is always identifying the "turn" in the markets from a bullish uptrend in advance. This issue is why most individuals, despite the best of intentions, generally wind up "selling bottoms" at the point of maximum pain.

With this in mind, I have cultivated a point-counterpoint set of views on the market. What we need to "ponder" over the weekend is discerning whether the current risk/reward ratio still justifies being long equities at the current time. Is this the time to "sell high," or is this just another "head fake" that will lead to further all-time market highs?


1) Bears Emerge, Is It Time To Buy? by Jeff Cox via CNBC

"Respondents to the weekly American Association of Individual Investors survey indicated their strongest levels of pessimism in almost a year. Bears outflanked bulls 38.2 percent to 30.9 percent. The level of negative market views was last eclipsed for the week of Aug. 22, 2013.

 

Of course, sentiment surveys generally are of most use as contrarian indicators—so when sentiment gets too heated to one side, it's best to move the other way"

Read Also: Pull Back Or Bigger Bear Market by Adam Shell via USA Today

2) The Tocalino Index by Sebastiao Tocalino

"The point that stands out recently is the noticeable gap between the rapid rise of the Dow Jones index and the lagging behavior of my own indicator from 2009 onward. Even if I take into account all the seemingly endless stimuli from the restless Federal Reserve, in my opinion the stock market still seems to be feeding more on some sort of paranoia, or complacency from lack of other investment alternatives, than any demographic, business and economic fundamentals could ever support."

Read Also:  Calm Before The Storm by Scott Granis

3) 3 Reasons The Sell-Off Isn't Finished Yet by Anthony Mirhaydari via MSN Money

"But the kicker has been indications that the Federal Reserve could raise interest rates in the early part of 2015 given the bounce back in the economy, ongoing strength in the jobs market and the newfound confidence by the more hawkish members of the Fed's Open Market Committee.

 

This is an issue that's not going away as folks are forced to prepare for the first increase in the cost of money in eight years."

Panic-Now-Freakout-080814

Read Also: Is It Time To Panic? by Ryan Detrick

4) Dow Theory Suggests Markets Will Still Rise by Mark Hulbert via MarketWatch

"The Dow Theory, for you history buffs, was introduced gradually over the first three decades of the 20th century in editorials in the Wall Street Journal by its then editor, William Peter Hamilton. The three preconditions for a sell signal that he set out are:

 

• Step #1: Both the Dow Jones Industrial Average and the Dow Jones Transportation Average must undergo a “significant” correction from joint new highs.

• Step #2: In their subsequent “significant” rally attempt following that correction, either one or both of these Dow averages must fail to rise above their pre-correction highs.

• Step #3: Both averages must then drop below their respective correction lows

 

To be sure, though these steps might appear to be clear enough, they still leave room for interpretation. Among the three Dow Theorists I follow, for example, there is disagreement about whether step #1 has even been satisfied by recent market action."

Read Also:  How You Will Know If It's Time For A Market Crash by L.A. Little via MarketWatch

5) You Have Been Warned by John Hussman via Hussman Funds

"The worst market return/risk profiles we estimate are associated with an early deterioration in market internals following severely overvalued, overbought, overbullish conditions. This is what we observe at present. In contrast, the strongest market return/risk profiles we estimate are associated with a material retreat in valuations coupled with early improvement in market internals. I have every expectation that we will observe this combination over the completion of the present market cycle. So I expect that, perhaps to the surprise of many who don’t understand this approach, we will be quite bullish and aggressively invested as market conditions shift over the completion of the present market cycle. But now is emphatically not that time."

 

Hussman-080814

 

 Read Also: Don't Buy This Dip, The Fed Ain't Your Friend by David Stockman

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 08/08/2014 - 16:33 | 5067368 observer007
observer007's picture

ISIS

The U.S. military has begun a second round of airstrikes against ISIS near Irbil, U.S. officials told CNN on Friday.

Latest News:

http://tersee.com/#!q=isis&t=text

Fri, 08/08/2014 - 16:33 | 5067374 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Please help me here or is this author just regurgitating other articles?

Fri, 08/08/2014 - 17:13 | 5067524 dark_matter
dark_matter's picture

Definitely. He spent 3 days gurgitating other articles so he could do this.

Fri, 08/08/2014 - 16:41 | 5067403 TideFighter
TideFighter's picture

This only happens when Obozo draws another red line in the sand  

Sun, 08/10/2014 - 01:16 | 5071993 good man
good man's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... http://goo.gl/bhiamE

Sun, 08/10/2014 - 01:16 | 5071994 good man
good man's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... http://goo.gl/bhiamE

Fri, 08/08/2014 - 16:33 | 5067373 Cattender
Cattender's picture

OMFG Dudes... the Dow Went UP 185 Fucking Points today! It's a Recovery!!!!!!! LOL!!!!

Fri, 08/08/2014 - 16:37 | 5067391 TeamDepends
TeamDepends's picture

We've been thinking of investing in Facebook.  Is now the right time?

Fri, 08/08/2014 - 16:43 | 5067406 Spastica Rex
Spastica Rex's picture

It's ALWAYS the right time.

Fri, 08/08/2014 - 17:04 | 5067482 freewolf7
freewolf7's picture

The lake is filling up with silver.

Fri, 08/08/2014 - 16:46 | 5067421 Cattender
Cattender's picture

Ask Suckerberg..

Fri, 08/08/2014 - 17:01 | 5067476 Da Yooper
Da Yooper's picture

Folks

 

Now is not the time to be a pig

 

because

 

pigs get slaughtered

 

time to go to cash

Sat, 08/09/2014 - 23:22 | 5071809 MontgomeryScott
MontgomeryScott's picture

"time to go to cash"

Should I buy paper cash futures, or cash in my SLV and GLD futures and transfer it in to paper cash investments?

If I buy Scott Tissue and Charmin using the cash I went to to, do I need to thank you for a soft landing every time I wipe my assets due to your sage advice?

What denomination of 'cash' should I invest in? Which Central bank's cash notes burn the longest in the middle of winter? Which cash notes wipe me cleaner (and don't clog the plumbing when I flush the bowl)? If I fold 30 different cash notes of debt from 30 different nations into identical paper airplanes, which one flies the farthest?

Did you inflate the balloon enough to withstand the increase in pressure, this time? 10 notes are now inflated to 20, but the pressure doubled, and the 20 are actually worth 10. IF 10 notes were only inflated to 15, and the pressure doubled, this means that your 15 notes are only worth 7.5.

The story about the PIIGS that moved in to a BRICS house are much better than your advice, I think.

A DIP IS a 'MARKET CORRECTION' by Keynsian definition, so the story title is kind of misleading.

If it IS JUST a 'DIP', then buy the fucking dip, you fucking idiot.

http://www.youtube.com/watch?v=0akBdQa55b4

Of course, if it is a total disambiguation of the current 'market reality' that you are thinking of, then cash won't mean shit either (useful only to wipe shit from your ass).

FAIR WARNING:

http://www.youtube.com/watch?v=U2R2KXNQR1M

 

 

Fri, 08/08/2014 - 18:21 | 5067788 AdvancingTime
AdvancingTime's picture

I was told it was because Putin was standing down. Did anyone tell him?

Fri, 08/08/2014 - 16:35 | 5067383 LawsofPhysics
LawsofPhysics's picture

Trying to predict market moves is impossible, simply try and recognize the truth instead, that there is no public market for true price discovery.

Fri, 08/08/2014 - 16:37 | 5067394 astoriajoe
astoriajoe's picture

Perhaps the fed is trying to discover the price at which the biggest sucker will buy?

Fri, 08/08/2014 - 17:42 | 5067654 scraping_by
scraping_by's picture

Or a price level that will keep big stockholders comfortable in the lifestyle they're accustomed.

Fri, 08/08/2014 - 20:55 | 5068429 Amish Hacker
Amish Hacker's picture

Yes, LoP, and holders of physical are betting that truth will have the last word.

Fri, 08/08/2014 - 16:40 | 5067402 ugmug
ugmug's picture

The White House has ordered more batteries for their sex toys while the Pentagon ordered more pizzas.....they're planning something big......

Fri, 08/08/2014 - 16:57 | 5067463 Squid Viscous
Squid Viscous's picture

Reggie aint be needin no batt-rees yo!

Fri, 08/08/2014 - 19:36 | 5068104 Ben Ghazi
Ben Ghazi's picture

I thought they used solar powered sex toys.

 

 

Better for the environment than disposable batteries.

Fri, 08/08/2014 - 16:41 | 5067404 Spastica Rex
Spastica Rex's picture

Why should what's happening around the world matter to the stock market? Has the trouble in Ukraine reduced winnings in Vegas? Is Powerball not paying out, anymore?

Fri, 08/08/2014 - 17:37 | 5067634 scraping_by
scraping_by's picture

The media is brimming with stories about entertainers with large breasts. War, fraud, and austerity take a back seat to massive hooters. How can the market be in trouble if there are photos of epic knockers filling the bandwidth?

Sat, 08/09/2014 - 23:38 | 5071845 MontgomeryScott
MontgomeryScott's picture

Lots of beer commercials too.

Titties.

Beer.

Titties and Beer.

Thank God I ain't queer!

http://www.youtube.com/watch?v=SgyeshD8RJY

I have been authorized to assure you that, so far, there is no reasonable cause for alarm.

Without Titties, Beer, and Gulf Oil, life itself would be literally impossible (including the electricity used to run the TV that the stories about titties and ads for beer are powered by):

http://www.youtube.com/watch?v=6ei6hh78aXg&list=PLF9BB6DCD96F973F9

 

Fri, 08/08/2014 - 16:44 | 5067415 Sudden Debt
Sudden Debt's picture

Hmmm... A market.... That is rigged from top to bottom...
Crash? So they'll lose trillions?...
All that effort for nothing...

Sure....

They'll let it go without a effort...

Fri, 08/08/2014 - 16:47 | 5067429 Cattender
Cattender's picture

Rigged?!?!? No Fucking Way!!!!! (that would be creepy as Hell!)

Fri, 08/08/2014 - 17:45 | 5067670 scraping_by
scraping_by's picture

Instead of 'rigged' try the words "supported' or 'centrally planned' or 'protected'. "Rigged' is such a harsh word. They'll think you have no manners.

Fri, 08/08/2014 - 18:19 | 5067776 AdvancingTime
AdvancingTime's picture

Well said! With such a way with words Washington most likely has a spot for you.

Fri, 08/08/2014 - 18:37 | 5067850 TheSecondLaw
TheSecondLaw's picture

So true.  Which is why "enhanced interrogation techniques" is so much more civilised a term than the crass use of the term "torture".

Fri, 08/08/2014 - 16:52 | 5067442 A82EBA
A82EBA's picture

S&P up 160% since '09 downing black swans like clay pidgeons

Fri, 08/08/2014 - 17:22 | 5067563 disabledvet
disabledvet's picture

I missed the last twenty and am glad to have done so. With the entire CONTINENT of Europe rolling over and Germanicus Ridiculous hitting negative yields I think I'll sit this one out.

Fri, 08/08/2014 - 18:43 | 5067873 TheSecondLaw
TheSecondLaw's picture

Black Swans are Black Swans because they seldom happen. And when they do they tend to have catastrophic consequences. Corrections are not Black Swans. Think > 3 sigmas and you're on the right track.

Fri, 08/08/2014 - 16:59 | 5067470 buzzsaw99
buzzsaw99's picture

there is no spoon

Fri, 08/08/2014 - 17:01 | 5067473 q99x2
q99x2's picture

Dear Lance, the stock market indexes are FED software and are a clandestine way for bankers to bribe politicians and big business, and a means to transfer everyone elses money to them.

BTFD 

Fri, 08/08/2014 - 17:06 | 5067494 ebworthen
ebworthen's picture

S&P 666 true valuation.

Fri, 08/08/2014 - 17:10 | 5067510 rosiescenario
rosiescenario's picture

Under the beneficial control of our brilliant Federal Reserve, there are now only 'dips'....market crashes, corrections, etc. no longer exist. As the Fed perfects its technique, soon we will not even have any more dips...therefore you should use every current dip to load up on stocks, especially those that have a large crowd following easily identified by a lack of earnings versus price.

Fri, 08/08/2014 - 17:10 | 5067513 Rainman
Rainman's picture

Fed ain't gonna raise rates next year ... I'll eat an octopus eye if wrong.

Fri, 08/08/2014 - 17:48 | 5067680 scraping_by
scraping_by's picture

Well, they could always raise rates for the masses, then have a special rate for certain systemically important entities. Just like now, only more so.

Fri, 08/08/2014 - 19:12 | 5068007 Duffy Duck
Duffy Duck's picture

oh, the discount window will still be wide open - free cash for the Squid!

 

Fri, 08/08/2014 - 20:01 | 5068230 Otrader
Otrader's picture

The Squid owns the discount window.   The rest is just theater.

Fri, 08/08/2014 - 17:27 | 5067589 BullyBearish
BullyBearish's picture

Not a crash...never a crash...simply a RESET a la 2011

 

http://www.barchart.com/chart.php?sym=%24MMFI&style=technical&template=&...

 

Fri, 08/08/2014 - 19:44 | 5068155 Ben Ghazi
Ben Ghazi's picture

Reset?  Where have we heard that before?

 

Oh, Yeah!

http://www.youtube.com/watch?v=kDGERFcIJ8I

 

 

Fri, 08/08/2014 - 17:39 | 5067643 The Phallic Crusader
The Phallic Crusader's picture

buy the f'ng dip we got a ways to go... troops to get in place.. flase flags to concoct...

Fri, 08/08/2014 - 17:42 | 5067653 Keltner Channel Surf
Keltner Channel Surf's picture

BTFD: 

Bury The Freaking Daytraders

Bungee Tethered, Feet Dangling

Fri, 08/08/2014 - 18:14 | 5067758 AdvancingTime
AdvancingTime's picture

The market today was a fucking joke as bears with tight stops ran for cover.  To say the market is rigged is an understatement. After over 30 years of trading commodities I will flat out state without any reservations that lies and manipulation run rampant. If you think anyone is looking out for the small independent trader you are wrong.

An unholy alliance of the Federal Reserve, the government, and the too big to fail has left the rest of us in a precarious position. For the big boys, its insider information and computer trading, this includes computing patterns that exploit where stops are placed, this improves their ability to wash the weak out of their positions. The bottom-line is that the higher the market goes the more vulnerable it becomes to a major collapse and sudden downward move. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/07/markets-more-lies-and-munipulatio...

Fri, 08/08/2014 - 19:11 | 5068004 Duffy Duck
Duffy Duck's picture

good stuff, but you left out that there's a revolving door between the banks and the oversight agencies, and them and the DOJ aren't doing shit.

Too bad we don't have "standing" to sue the entire US government for conspiracy.

Fri, 08/08/2014 - 20:36 | 5068351 Kreditanstalt
Kreditanstalt's picture

Oh, get real.....!

The last, absolutely THE LAST thing the governments or their central banks ever wish to see is their LOSING CONTROL OF INTEREST RATES.  Armageddon for debtors, the leveraged, banks and governments.

NOT going to happen.  The manipulation will continue until morale improves.

Fri, 08/08/2014 - 21:45 | 5068595 Wahooo
Wahooo's picture

Time for a word from Joey Diphard....

www.youtube.com/watch?v=4MtLhl6NdGw

Sat, 08/09/2014 - 00:10 | 5068934 Midnight Rider
Midnight Rider's picture

Here's the story...there is a historically massive crowd all on the same side of the trade right now. Forget what the fund managers and others might say about being anywhere near bearish. They all, and I repeat, all believe they will be able to exit when the music stops. That's right, everyone, including Lance Roberts, believes they will be able to exit what will instantly become a massively narrow door, all at the same time taking all their ill-gotten gains with them. On top of this, it will be their clients that all take it in the shorts while they clean up with more commissions on the massive selling action. Who knows when the hell this will happen, but happen it will. We have complete amnesia of what it felt like after 2000 and 2007. The market as a whole is crazier now that at either of those times, the country is much more massively in debt and we have evicerated the middle class of the country. Our country's politics have completely gone down the toilet, everything bought and paid for by the .01% at the top. The "wealth" generation of the past 5 years has been complete vapor paper that can be wiped out overnight ala 1987. Company balance sheet have been leveraged and raped for all they are worth leaving behind a massive shell of debt. After trillions and trillions and trillions of debt dollars being plowed into this hollow shell of an economy, we can barely keep it out of stall speed. Oh, yeah, this is going to turn out just fine. The confidence Lance shows in the fact that the market, despite having barely moved YTD isn't showing signs of an exhaustion top, probably ensures that the top actually is in. If it isn't, it is going to be an even more spectacular explosion when the Fed pumped cassette tape winds off the end of the reel and the inevitable end of the music is here.

Do NOT follow this link or you will be banned from the site!