Stock Markets: “What Happens When the Dip Keeps Dipping?”

These can “work tirelessly to keep investors trapped on the wrong side of a bearish trend”

by Bob Stokes
Updated: May 10, 2022

It's been a rocky road for the Dow and the S&P 500 index since the start of the year. And, even longer for the NASDAQ, which topped back in November.

Indeed, speaking of technology stocks, some of the most popular names took a big beating in April alone. As the Wall Street Journal noted (April 29):

The FAANG stocks, consisting of the popular quintet of Facebook parent Meta Platforms, Apple, Amazon.com, Netflix and Google parent Alphabet, have collectively lost more than $1 trillion in market value [in April], the most since Facebook started trading in May 2012.

So, you might think that this bumpy ride in the stock market would have many investors at least considering moving to the sidelines, especially those with a sizeable nest egg to protect.

Well, according to a UBS Investor Sentiment survey of millionaire investors -- conducted between April 5 and April 18 -- most of those surveyed plan to stick with stocks.

Here's a May 4 CNBC headline:

More wealthy investors would rather hold or add stocks than sell if markets keep sliding, survey says

Granted, this survey was taken before some of the roughest trading days in April. Still, it shows a recent willingness by even the "cream of the crop" in society to "buy the dip."

No doubt, that same lingering bullishness has persisted in other nations too.

With that in mind, our April Global Market Perspective provided an object lesson in buying the dip, using past bear markets in Germany's DAX as examples:

DipKeepsDipping

[These two graphs illustrate] the multi-week and multi-month rallies that work tirelessly to keep investors trapped on the wrong side of a bearish trend. The left graph depicts every plus-10% rally from March 2000 to March 2003, a three-year span that saw the DAX drop by 74%. The right graph illustrates the bear market from July 2007 to March 2009, which saw seven rallies of 10% or more.

So, "buying the dip" can be a financially dangerous strategy.

In our view, it's best to consult a financial market's Elliott wave structure before making a decision about your portfolio.

Our Global Market Perspective provides Elliott wave insights into major stock markets around the globe, including the U.S.

This professional-grade monthly publication also offers actionable analysis of cryptocurrencies, forex, global bonds, crude oil, gold and silver and other financial markets.

Click on the link below to get our global financial forecasts now.

The Next Global Financial Downturn: Why Wait to Prepare?

A "warning" is helpful only if you act on it beforehand.

Alas, in the financial world, most people wait until the first domino (or two) falls before they protect themselves.

Yet dominoes fall one piece at a time -- whereas financial markets plummet with shocking speed.

By the time most investors decide what to do, too much portfolio damage has already unfolded.

Don't be like most investors.

Enjoy the financial confidence that comes with being prepared before the next global financial downturn.

Follow the link below to read our May Global Market Perspective for useful financial insights.

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