The Danger Of Buying The Next Dip | Seeking Alpha

The Danger Of Buying The Next Dip | Seeking Alpha



Here is an outstanding article by Eric Parnell about the danger of buying a -10% pullback in today's bull market.   He used examples from three past bull markets where buying a large dip did not work in the late stages of the bull cycle.  In all three of Eric's examples, a bear market soon followed after a -10% drawback.  So, it is not worth buying big dips in an old bull market.  The market can still move higher, but anything other than a 5% pullback might be dangerous.



Of course, buying various sizes of dips will work great in a beginning bull market, but we are way past that scenario now.  You may also recall that the bear market decline that began in 2000 started while we were not in a recession.  So, you can't trust good economic conditions either.  Rising interest rates may be the biggest tip-off for the stock market top.  When bonds start paying about the same percentage that stocks are gaining, it will be time to move to the sidelines.  You could also buy TLT, the 20+ year treasury bond ETF and do well then.