When to buy dips
Stocks ended the day mixed yesterday
but the action has been the same. The TSP funds were also mixed,
but there were new highs for the Dow, S&P 500, and the Nasdaq.
The S&P 500 continues to dance on the high wire of the overhead
resistance. The bulls are fully in charge right now, so if you are
on the sidelines, should you buy now?
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
Back in 2002-2003, as the 2000-2002 bear
market was wrapping up, the S&P 500 made a move above the 200-day EMA, just
as it did last month. Once it broke above in April 2003, that was
basically it, it turned out to be a great time to buy, although if you were
patient, you did get a few very cooperative pullbacks along the way.
As I have been saying, if we get a pullback to the 200-day EMA, and it
holds, that will be a great indication that there will be more good things
to come. As I said, it happened in April of 2003, and shortly
afterward we saw a pullback in May '03 back to the 200-day EMA, which held.
About a week later there was a confirming crossover of the 50 passing above
the 200-day EMA.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
You could have chased and done well but
as you can see above, there were many pullbacks that found support at the
50-day EMA, and turned out to be very good buying opportunities.
The 50-day EMA is currently still below the 200-day EMA (no crossover yet),
but only by 9-points now. Although the 50-day EMA is rising, it is
still 72-points below the S&P 500. At some point the S&P is going to
pull back to the 50-day EMA. How that actually plays out, I don't
know. It could happen this week, next week, next month, etc., but it
will happen. Obviously, the longer it takes the less extreme the
pullback will be (assuming the 50-day EMA holds).
Just something to think about if you are pulling your hair out watching the
market go up every day without you.
That's all for today. Thanks for reading!
See you back here tomorrow!
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