'Buy the Dip' Action in the Stock Market Is Failing

 | Dec 06, 2017 | 1:04 PM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:




We have a good illustration this morning of how the "buy the dip" pattern is starting to change. The gap down in the Nasdaq this morning was a classic setup for the "buy the dip" crowd, but they are now inclined to sell into the bounce rather than ride it for me. This is what happened yesterday and there are signs of the bounce fizzling out again today.

Another issue is that the senior indices are not benefiting from rotation any longer. The S&P 500 ETF (SPY) and the DJIA ETF (DIA) are down for a second day without any sign of a bounce so far. There is still underlying support, but it is weak and if there isn't some upside soon, I expect to see the bears press.

Breadth is running about 2400 ups to 4050 downs, but most interesting is that the number of new lows is around 70, which is higher than the number of new highs. That is a stark illustration of how momentum has collapsed.

The rotational bounce covered that up for a while, but the issue now is that there isn't any great leadership. We had financials, oil and some retails leading this past week, but none of these groups has been very good at producing the sort of sustained momentum that technology produces.

Individual stock action on my screens is very poor. I am not seeing any good long setups right now. The stuff that is moving is a mishmash, with some cryptocurrency and blockchain names showing up but no really dominant sector action taking place.

The market is losing confidence in the dip buyers -- and that is a problem.

Columnist Conversations

Tilray's staggering 41% rise this morning leaves the company with an insane valuation and leaves Canopy Growth...
I badly want to be the person that calls the top in red-hot cannabis stocks, but fear looking like a short-ter...
Now the government will get to really dive into the inner workings of Tesla (TSLA) . Who knows what else they...
In GS I see key price support at the 224.49-226.42 area.  I also have timing for a possible low.  I ...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.