Jeff Saut of Raymond James offers some commentary on how "easy" it is to trade the market right now. It's basically this simple: When stocks go down, you buy the dip. Voila.
"Can it be that easy?" is a question I asked a portfolio manager (PM) during my recent institutional accounts visit to NYC. He asked me, "What do you mean?" I responded, "Can it be that easy as to buy the S&P 500 (SPX/1955) anytime it pulls back 5%?" He stated, "It hasn't been that easy during my 35-year tenure in this business, but that has certainly been the correct trading strategy since the June 2012 low." And two weeks ago, with the S&P 500 off 4.4% from its intraday high to intraday low (1991 to 1904), that was again the preferred strategy of professional traders as they were sneaking large "buy orders" into the markets right on the closing bell. At the same time the Commitment of Traders' report (COT) showed a marked decline in professional traders' "short sales." The inference was the "pros" were betting this was going to be another garden variety 5% - 7% decline before the uptrend resumes. In our discussions in preparation for this month's edition of Gleanings, Andrew Adams noted, "Since I tend to be a trend follower, I am inclined to buy the 5% - 7% dips until the strategy stops working."
Indeed, in case you haven't been paying attention, after tanking at the end of last month the Dow is almost back to its new highs.
