If I see a sharp decline in stocks I will probably buy the dip again, but the current ill-wind strikes me more like the calm before the storm then an opportunity.
Obviously the opportunity to jump on this did not become apparant until after the deadline...but I am not going to enter my IFT just yet.
Take a look at this chart and look at the pattern that is developing compared to the period starting 2006. If a similar situation manifests, we may see another solid red day and some floundering as the market struggles at the 50 day moving average seraching for support. In such a situation, the looming possibility of a pullback and the end of the second quarter may weigh on the dip buyers, and we may not get the nice next day recovery that we are becoming accustomed too. I will probably buy the dip just because it's been successful so far, however, I will do so with the understanding that if the market moves lower, I will eat the loss and bail back to safety.
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Read this from Yahoo's Market Summary:
4:25 pm : The stock market struggled today, but not the entire day as a blowout earnings report from
Morgan Stanley (MS 87.32, -0.48), word from
Home Depot (HD 40.03, +1.76) that it is increasing its stock buyback authorization by a massive $22.5 billion, and a drop in oil prices all helped to keep selling efforts in check during the morning session.
The bulls, however, never quite stepped up to the plate with any conviction; and the afternoon trade played out in a decidedly bearish fashion when bids all but disappeared around 1:00 ET.
A backup in the 10-year note yield from 5.09% to 5.14% will garner much of the blame for the reversal of fortune, but that is a dubious excuse when taking into account that the drop in yield last week from 5.32% to 5.17% was viewed as a rallying point.
So, with the yield still below its best level from last week, it doesn't make a great deal of sense that the bump to 5.14% would cause such a negative reaction today.
What did then, you ask? There isn't a definitive answer, but a plausible explanation relates to reports that Bear Stearns may be shutting two mortgage hedge funds due to losses suffered in the wake of the subprime fallout.
A whiff of this possibility sparked spillover concerns that hit the broader market in a sell-first-ask-questions-later move that manifested itself in vivid form in the financial sector (-1.7%) which sold off in the afternoon trade. Incidentally, the financial sector began to weaken noticeably around 1:00 ET and closed at its lows for the session.
The fact that selling accelerated in the final hour when bond yields held fairly steady validated the idea that something other than the backup in yield got the better of today's participants.
Overall, there just wasn't any sector leadership to save the market. All ten economic sectors ended lower with energy (-2.9%) leading the way.
The latter sector got clobbered after a weekly inventory report from the government showed a much larger than expected 6.90 million barrel build in crude stockpiles versus expectations for a slight draw of 50K barrels. July crude futures dropped $0.91 to $68.19 per barrel, which was a boon for the airline stocks today.DJ30 -146.00 NASDAQ -26.80 SP500 -20.86 NASDAQ Dec/Adv/Vol 2186/848/2.02 bln NYSE Dec/Adv/Vol 2550/749/1.54 bln
