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:
[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.
Global Market Perspective
Gives you clear and actionable analysis and forecasts for the world’s major financial markets.
Get insights for the U.S., European and Asian-Pacific main stock indexes, precious metals, forex pairs, cryptos (including Bitcoin), global interest rates, energy markets, cultural trends and more.
When you combine Elliott waves with other technical analysis indicators, often it helps you clarify your forecast. Watch our Currency Pro Service editor, Michael Madden, combine the waves with classic technical tools like Head & Shoulders and RSI to forecast the next move in USD/CAD.
Is the stock market's main trend up or down? It's a basic question that Elliott wave analysis helps you answer -- and thus anticipate countertrend moves that fool others -- even those who are accomplished. For example, here's the brief story of a physician's portfolio.
In early 2020, the Covid-19 pandemic delivered a "shock like no other" to the global commodities sector. The bearish "fundamental" shoe seemed to fit like a glove. But instead, a 2-year long bull market occurred. Maybe it's time to slip into a new pair of market analysis.