With the continued unknown outcome of the situations abroad, uncertainty runs rampant throughout the financial markets. Many have tried to quantify the effects of certain negative outcomes on the markets, but these estimates are rarely accurate. As I suggested in Another Greeceful Weekend many will try to advocate things are fine when they are not. When the market turns to have its pullback, which many bears have awaited, what point is opportune to get back in the market? For quite some time buying on the dip has been quite beneficial to many investors, but this strategies future is questionable. The real deciding factor in the pullback story is the catalyst that causes the market to trend lower (or drop off completely). When markets have come as far and gone so aggressively as they have in the recent past, when a reversal occurs it will likely be a dramatic one. To clarify, a reversal is not one of these days when we are down a little bit off some not great news, a reversal is when some real negative news comes out. The world appears to be much more investor friendly this year then last, but recall everyone opinions before the markets sold off last summer. If you don’t recall, things were rosy, look at the decline in jobless claims last year, everything seemed to be in a full fledged recovery. The rosy picture turned harshly negative and combined negative news had a intense effect on the market. Negative news will once again surface again and most likely when you least expect it. Be apprehensive of buying the dip because the bottom may be falling out from under you.
“I like to listen. I have learned a great deal from listening carefully. Most people never listen.” – Ernest Hemingway
