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Keep Buying the Dips

Title: Keep buying the dips
Author: Cetin Hakimoglu
Positions: Google, Mastercard, Potash Corporation

After the phenomenal 6.5 percent rally on March 23 stocks have taken a small breather. While most short sellers are rejoicing in this small victory, the celebration will be short lived as the rally continues. I emphatically believe that we’re in a new bull market that will last for many years, and thus every dips should indeed be bought on the way up.

The trend of low volatility continues. Since this bull market began three weeks ago there have been no major sell offs. The steepest one day sell of has been less than two percent, which is a testament to the unmitigated strength and resiliency of this bull market.

If we compare this bull market to the one that began in 2003 we see many similarities with regards to the cessation of volatility. The chart below shows how the 2003-2007 bull market began. Essentially all the volatility dried up as soon as the bull market began. The pink circle indicates where we are now relative to the last bull market. As you can see, the major breakout has happened and its just a steady, uninterrupted climb higher from here on out

The same pattern can be seen today:

The recent sell off only managed to erase just 90 minutes of the March 23rd rally. It’s nothing more than a minor pullback.

Now is the time to be buying all this dips. We’re in a new bull market, and the best way to make money in such circumstances is to go with the flow rather than resist it. The wall of worry is also intact because the market has yet to sell off on any economic data for the past three weeks. I still recommend google, apple, mastercard, potash corp, mosaic, bidu, and rimm.