Investors Chant ‘Buy the Dip’ Array ( [cookie] => 6e6845-d5f74b-d145a8-617e44-c4576b [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 1 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 39715 [reason] => Usage under limits [method] => ) 1 and can accesss 1
Our Views
- Investors have been persistently bearish while S&P 500 made all-time highs. This is rare and in the past 40 years, has only happened 11 times. Forward returns were generally good in these historical instances.
- Investors are “buying the dip” as 2025 is tracking better than expected, while market participation is broadening beyond the Magnificent Seven.
- While stocks fell sharply at the open Thursday and selling was broad-based, dip buyers stepped in and the resulting decline Thursday was modest. This is a pattern seen in 8 of the last 10 trading days — dip buyers step in on any market weakness. And it has been a pattern for 2025 overall.
- If investors are skeptical of markets at all-time highs, we believe the odds of an actual high in play are low.
- Short-term trends are bullish but extended following the recent pushback to new all-time highs for SPX and QQQ, while many other indices failed to participate.
- While DJIA, RSP, and IWM should eventually begin a similar move back to new all-time highs, at present, some minor consolidation looks to be underway in large-cap Technology following a stellar comeback.
- Given the subdued sentiment on both the retail and institutional levels, I continue to view the larger move for equities as being higher.
- A bullish equity structure combined with solid momentum and breadth arguably warrants the overweighting of US equities at a time when investors are largely unclear about the extent of tariffs or their implications.
- In the short run, it looks possible that SPX might show a minor retreat down to 6050-6075. However, ample reasons remain for optimism in the “larger scale of things” given the rebound in Technology.
- There is a chance that MSTR flows spark a short-term bounce here, but assets further out on the risk curve continue to face headwinds from ongoing uncertainty surrounding trade and monetary policy.
- Although the current administration takes a pro-crypto stance, there appears to be no immediate catalyst to revive market enthusiasm.
- We still anticipate that crypto will outperform this year, but until we see further progress on trade/monetary policy and renewed inflows into crypto, it may be prudent to raise cash or trim altcoin positions.
- President Trump and the White House were occupied with more DOGE-initiated cuts and dealing with the Russia-Ukraine war this week, but budget legislation was the focus in Congress.
- With the House in recess, Senate Republicans moved forward by passing the first of two planned budget bills to fund Trump’s agenda.
- The House remains focused on passing one large budget bill, as the President would prefer, but it is unclear whether House Republicans can accomplish this.
Wall Street Debrief — Weekly Roundup
Key Takeaways
- The S&P 500 slid 1.66% this week to close at 6,013.13, while the Nasdaq also declined, ending down 2.51% at 19,524.01. Bitcoin was at USD $95,113.81 on Friday afternoon, down about 1.2% from Monday levels.
- Fundstrat Head of Research Tom Lee sees investors buying the dip despite less-than-bullish sentiment as a positive.
- Head of Technical Strategy Mark Newton views it as important that the market has largely ignored worries of tariffs, maintaining its gains.
“Learning is the only thing the mind never exhausts, never fears, and never regrets.” – Leonardo da Vinci.
Good evening,
A good week for the stock market quickly turned sour after earnings disappointed from retail giant Walmart and reports emerged of a Department of Justice probe into UnitedHealth Group.
The S&P 500 set fresh records on Tuesday and Wednesday, but ended the week down 1.66%. The Nasdaq 100 had set records of its own on Tuesday, yet it fell 2.51% this week. The Dow Jones Industrial Average had just as bad a week, down 2.51% as well. Losses in the blue-chip index accelerated Friday after shares of healthcare titan UnitedHealth fell and a February survey from S&P Global showed declines in services-sector activity.
But Fundstrat Head of Research Tom Lee says it’s been encouraging to see that the market hasn’t declined more, thanks to dip buyers jumping in on any sign of market weakness. On Thursday, for example, Walmart warned investors about slower sales gains ahead, sending its shares plummeting down 6.53%. In contrast, the overall market slipped 0.43%, which Lee categorized as a “modest” retreat. “The S&P 500 has had many chances for a deeper sell-off, but these declines attract dip buyers,” he observed.
Lee explains that one of the reasons why this is happening this year is because investor sentiment is bearish, even though the S&P 500 is trading near all-time highs. When looking specifically at the American Association of Individual Investors’ (AAII) Sentiment Survey, the percentage of bears over bulls was reported at 11.3 percentage points higher in the most recent week, and 18.9 percentage points higher in the prior week.
Lee noted that there have been 11 prior instances in which the S&P 500 was within 1% of a 52-week high while AAII's net bulls metric was at negative 15 percentage points or worse. In those cases, the median 12-month return is 15.7%, with a win-ratio of 83%. Our Chart of the Week shows more details:
Head of Technical Strategy Mark Newton agrees that historically when the AAII survey reaches extremes, it typically bodes well for the market. “Just treat the market as being a bull market, look for opportunity and [don't] worry about what could go wrong,” he told us during our weekly research huddle. Instead, “really focus on what is happening [and] what’s affecting the market, which for the time being has really been precious little.”
Newton has been encouraged by recent signs of improved market breadth. “We haven’t seen any real deterioration in equities whatsoever,” Newton said. “The bigger picture is that the market is still in good shape.”
He likes that Technology is leading the charge, even with highflyers like Meta and Palantir taking a pause from their rallies. He’s overweight Technology.
In the near-term Newton expects to see the markets continue to consolidate over the next 3-5 days before posting a much larger push back to the upside. “I’m bullish, but, yes, there’s some things the market could do that would help to satisfy and make me a little more constructive that stocks can just simply trend up, and we’re clearly not in that regime just yet,” Newton said.
Elsewhere
It’s tax season time, yet the Trump administration is shaking things up in the Internal Revenue Service. Sources say about 6,000 workers are expected to be fired, which would eliminate roughly 6% of the agency’s workforce in the midst of a busy tax-filing season, threatening to delay refunds. In recent weeks, the Trump administration has targeted government agencies like the Consumer Financial Protection Bureau, the Department of Veteran Affairs, and the Education Department.
The Wall Street Journal reported that the Department of Justice has launched an investigation into the $400 billion health insurer UnitedHealth Group, pertaining to its Medicare billing practices in recent months. The newspaper had previously reported on how the health insurer makes questionable diagnoses to receive more in Medicare. Shares fell more than 7% on the news. In other negative news for the company, the DOJ also sued to block the insurer’s $3.3 billion planned acquisition of home-health company Amedisys on antitrust grounds.
Federal Reserve officials in January agreed they would need to see inflation decline more before they restart lowering interest rates, according to minutes from the last Federal Open Market Committee meeting released this week. They also expressed worry about the impact President Trump’s affairs would have in making that happen. “A majority of participants observed that the current high degree of uncertainty made it appropriate for the committee to take a careful approach in considering additional adjustments to the stance of monetary policy,” the minutes of the Jan. 28-29 policy meeting reported. At the most recent meeting, the committee decided to hold interest rates steady.
It’s now been about a month since Trump has been in office. Polls suggest that Americans are mad at him for not bringing down inflation as much as they had expected. A new CNN poll shows 62% of Americans feel Trump hasn’t done enough to tackle inflation. Meanwhile, they are concerned about his early actions to cut federal spending, polls showed. Another CNN poll found that 52% of Americans believe Trump has “gone too far” in exerting his presidential power, with a similar majority wary of tech billionaire Elon Musk’s elevated role in government.
Coinbase, largely referred to as the “adult in the room” by the crypto community, is breathing a sigh of relief. The SEC agreed to drop a two-year long lawsuit against the crypto exchange alleging that it had been operating an unregistered securities exchange and failed to properly register its crypto staking program.
And finally: Egyptian history nerds rejoice. Archaeologists have discovered the first royal Egyptian tomb since King Tutankahmun’s over a 100 years ago, the Egyptian Ministry of Tourism and Antiquities announced. A British-Egyptian team located it in the Western Valleys of the Theban Necropolis near the city of Luxor. While researchers had found Thutmose II's mummified remains two centuries ago, its original burial site had never been located, until now.
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Stock List Performance
Small Cap Stock List Performance
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SMID Granny Shots
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+21.01%
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+17.16%
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+33.92%
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