Entering text into the input field will update the search result below

This Isn't The Time To Buy The Dip


  • Stocks are rising on March 1 despite more inflation data.
  • The rally on March 1 isn't likely to last and should not be trusted.
  • There should be plenty more inflationary data as March moves on.
  • Looking for a helping hand in the market? Members of Reading The Markets get exclusive ideas and guidance to navigate any climate. Get started today »

Stocks are rising on March 1, largely ignoring the latest round of data suggesting that prices and input costs continue to rise. The latest ISM report revealed that prices paid increased to 86, which was well above estimates for 80 and much higher than January's reading of 82.1. One would have to go back to the summer of 2008 to find a higher reading on the index, an indication that costs are rising very quickly.

Equities have largely shrugged off the inflationary data, despite 10-year rates rising back to 1.44% and the 30-year climbing to back to 2.22%. Despite the bearish data for bond yields, real yields or TIPS have seen their interest rates fall to around negative 72 bps, which is largely why equities have risen.

More Inflationary Data To Come

The prices paid index is highly correlated to both the producer and consumer prices index. That's likely to suggest a strong year-over-year gain in the CPI and PPI data when it comes later in March.

Not Bullish For Stocks

Today's latest round of data is not bullish for equities and would suggest that rates continue to push higher overall. More importantly, it indicates that real yields push higher as well over time and that today's move lower in real yields is likely just a giving back from last week's rapid rise.

The rise in real yields has massively underperformed the rise in 10-year Treasury rates. That has resulted in breakeven inflation rates moving sharply higher, which has helped send the wrong message overall to the equity market. But as real yields begin to play catch-up to the nominal 10-year rate, it's likely to push those breakeven inflation rates lower, resulting in equity prices following lower, causing massive volatility.

One should care about the breakeven inflation expectations because equity

Reading The Markets is designed to provide members with a better understanding of the stock market and to provide stock ideas. Just like the free articles you have grown to love reading.

Or if you want to learn about how the markets function, I can teach you that too.

To Find Out More Visit Our Home Page

This article was written by

Mott Capital Management profile picture

I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.

I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels. 

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (199)

Every time I hear "buying the dip", I think of our Elon.
Michael Clark profile picture

AMAZON, for instance.

1 Short 29 09/08/00 10/19/00 +15.188 +35.37 Exit Short
2 Long 12 10/19/00 11/06/00 +8.812 +31.76 Exit Long Rule
3 Long 13 01/08/01 01/26/01 +4.562 +30.54 Exit Long Rule
4 Short 49 01/26/01 04/06/01 +11.130 +57.08 Exit Short Rule
5 Long 17 04/12/01 05/08/01 +1.510 +10.29 Exit Long Rule
6 Short 84 05/08/01 09/06/01 +8.030 +49.63 Exit Short Rule
7 Long 108 10/04/01 03/12/02 +9.270 +131.68 Exit Long Rule
8 Long 25 04/12/02 05/17/02 +5.850 +43.95 Exit Long Rule
9 Short 51 05/17/02 07/31/02 +4.710 +24.58 Exit Short Rule
10 Long 83 07/31/02 11/26/02 +8.950 +61.94 Exit Long Rule
11 Long 62 12/20/02 03/24/03 +4.300 +19.61 Exit Long
12 Short 109 10/20/03 03/26/04 +17.890 +30.02 Exit Short
13 Short 43 06/14/04 08/13/04 +13.120 +26.64 Exit Short Rule
14 Short 42 09/03/04 11/03/04 +2.820 +7.28 Exit Short
15 Long 149 05/03/05 12/02/05 +15.850 +47.73 Exit Long
16 Short 105 12/15/05 05/18/06 +16.870 +34.09 Exit Short Rule
17 Short 33 06/30/06 08/17/06 +9.590 +24.79 Exit Short
18 Long 69 08/17/06 11/24/06 +13.320 +45.79 Exit Long Rule
19 Long 194 01/19/07 10/25/07 +51.190 +138.28 Exit Long Rule
20 Long 110 03/07/08 08/13/08 +22.600 +35.26 Exit Long Rule
21 Short 36 08/13/08 10/03/08 +19.690 +22.71 Exit Short Rule
22 Long 102 11/26/08 04/27/09 +39.160 +89.08 Exit Long
23 Long 236 05/15/09 04/23/10 +70.030 +95.15 Exit Long Rule
24 Long 334 05/14/10 09/09/11 +82.860 +64.47 Exit Long Rule
25 Long 215 11/11/11 09/20/12 +43.420 +19.97 Exit Long Rule
26 Long 60 10/26/12 01/28/13 +37.800 +15.87 Exit Long Rule
27 Long 14 02/15/13 03/08/13 +9.100 +3.43 Exit Long Rule
28 Long 234 08/16/13 07/23/14 +73.320 +25.74 Exit Long Rule
29 Long 250 08/08/14 08/06/15 +212.660 +67.13 Exit Long
30 Long 179 01/22/16 10/06/16 +245.280 +41.13 Exit Long
31 Long 338 11/04/16 03/13/18 +833.130 +110.34 Exit Long
32 Long 105 04/06/18 09/05/18 +589.590 +41.96 Exit Long
33 Long 134 10/19/18 05/06/19 +186.520 +10.57 Exit Long
34 Long 36 05/24/19 07/17/19 +168.750 +9.26 Exit Long
35 Long 133 08/09/19 02/20/20 +345.520 +19.12 Exit
36 Long 121 03/13/20 09/03/20 +1,583.000 +88.68 Exit Long
KEY, #36: Bought AMZN on 3/13/20. Held position 121 trading days, sold 9/3/20, for a gain of 1,583 points or 88.68%.

MOST RECENT TRADE. LONG 3/5/21. 4 TRADING DAYS SO FAR. Up 3.77% Position still open.

UPDATED 3/16/21
37 Long 7 03/05/21 03/16/21 +91.400 points +3.05% Open
Michael Clark profile picture
BUY THE DIP IN TSLA. M2F ALT x3 Stock System. Buy signal today.

1 Long 40 09/17/10 11/12/10 +1.922 +47.50 Exit Long Rule
2 Short 63 11/29/10 03/01/11 +2.078 +30.27 Exit Short Rule
3 Long 183 03/01/11 11/17/11 +1.948 +40.69 Exit Long Rule
4 Long 346 01/10/12 05/29/13 +15.402 +278.82 Exit Long Rule
5 Short 43 10/02/13 12/03/13 +7.250 +20.03 Exit Short Rule
6 Long 62 12/03/13 03/05/14 +21.592 +74.61 Exit Long Rule
7 Long 99 04/16/14 09/08/14 +16.600 +41.69 Exit Long Rule
8 Short 91 09/08/14 01/16/15 +17.808 +31.56 Exit Short Rule
9 Short 258 02/06/15 02/17/16 +9.736 +22.40 Exit Short Rule
10 Long 35 02/17/16 04/07/16 +17.704 +52.48 Exit Long Rule
11 Long 187 05/19/16 02/15/17 +12.910 +29.99 Exit Long Rule
12 Long 30 08/08/17 09/20/17 +1.738 +2.38 Exit Long Rule
13 Short 33 09/20/17 11/06/17 +14.226 +19.02 Exit Short Rule
14 Short 338 02/01/18 06/07/19 +28.950 +41.45 Exit Short Rule
15 Long 33 06/07/19 07/25/19 +4.864 +11.89 Exit Long Rule
16 Long 104 09/06/19 02/05/20 +101.450 +223.02 Exit Long
17 Short 21 02/20/20 03/20/20 +94.376 +52.47 Exit
18 Long 33 03/20/20 05/07/20 +70.502 +82.45 Exit Long
19 Long 68 10/19/20 01/27/21 +433.330 +100.58 Exit Long

KEY, #19: LONG 10/19/20. Sold 1/27/21, after 68 trading days. GAIN of 433.33 points or 100.58%.

20 Long 1 03/08/21 03/09/21 110.58 points 19.64% Exit Long Rule
Sensible Investor profile picture
Why are you generalizing? On Friday, several hundred companies made new highs, as they did the day before on a so-called down day. I buy investments, not markets. Don't you? I like Dell, Google, Visa, Oregon Bank, etc. I like Warren Buffett's approach to investing which ignores conventional chasing of 1/8ths for the best price. There is no right time to buy, just the right investment at that moment. They will always exist. I take these articles as contrarian indicators and I ignore them.
@Sensible Investor , You are basically saying that this is a stock pickers market.
Seng Hong Teoh profile picture
@Sensible Investor , when they have nothing to say, they generalize. When they don't know what they are talking, they generalize.

Just like what I'm doing a bit here ... LOL!
@Seng Hong Teoh , Even military Generals generalize.
You can’t time the market. If your a holder and can afford to buy, always buy the dip. That’s precisely when you buy.
@LJuanSanchez , How do you gauge it?
By doing DCA, you are guaranteed to buy the dip, that's how.
Crayfishkaliari profile picture
@LJuanSanchez ok but you can slice up your rate of buying proportional to the overvaluation of the market in general and your specific equities in particular
I don't think the correction is over. Interest rate climbing again. It was so courteous of it to wait until the market closed. Or sneaky. I suspect there will be better buying opportunities ahead.
@MieleH Monday will be a huge open.
@esadams Mondays are often robust. And then comes Tuesday, which is generally a different story.
@esadams This past monday was really a great one wasn't it? Now compared to the Friday close...
Good call I think.

Also been wondering what effect a stimulus package may have upon inflation. Getting to be alot of it cumulatively.

Think the plan is still to raise corporate tax rates something like from 21% to 28%. Would assume if/when that transpires it would drive down the market to some degree.

I pumped in alot when things were low in 2020 - maybe 2021 is more of a wait and see year.
Go Lakers profile picture
@twofourfour If Congress only passes tax increases, you are right, but Congress rarely does that, and you can see that in this $1.9T bill that is called COVID relief but has only $892B of actual COVID related spending. So there's a spare $1T from the prior stimulus and some people want another almost $2T....seriously??

If infrastructure gets passed too, anything you lose in higher taxes gets gained in infrastructure and (unnecessary) stimulus. I call a push...especially given all of the other cash getting pushed out in both monetary and fiscal stimulus.
@twofourfour Inflation isnt the issue, because we arent seeing it when we're still stuck at home with Netflix. The velocity of money will be the issue. The market already got a jump on that for us. Thats the irony of reopening...
Hindenburg Omen this week.
@Don Allen1445 , The Hindenburg burned up.
Skyfall7 profile picture
Its obvious would be correction. And good one ☝️ doesn’t make the companies not worth investment.. but hopefully at more reasonable prices.. just rotations, oil energy & mining now be sold off & when tech cheap enough back in!
Inflation: most of western world been in lockdown. Still 20-30% workers on furlough in U.K. Nothing being made, can’t get supplies. Oil supply lowered. When things open up & more stock, will inflation still climb. It’s down to Opec more than fed. Will they let more oil supply to meet new demands for production. Have companies hedged oil purchases at good rates. Let’s hope so.
@Skyfall7 , OPEC is in charge of oil as usual.
Skyfall7 profile picture
@kimbillro inflation is controlled by OPEC more than fed!
@Skyfall7 , Yes, especially this time around.
good call...it is all over for tech but for the crying.
@Don Allen1445 , I am crying now to get it over with early.
And yet others say buy the dip. Hedge funds are manipulating market for revenge.
Where's the dip? Everything I own keeps going up and up.
Skyfall7 profile picture
@Vanamo what you holding please ? ;-)
@Skyfall7 , @Vanamo must be holding a skyhook @sky@Skyfall7 .
1.7 Trillion of fungible cash just might have a tiny effect, No.....?
@Jpokergman , Not everything is fungible.
@kimbillro Good point.
shaderhacker profile picture
Spot on author!

I think we are at the beginning of a recession we never had last year. You heard it here first!
Sundance Utah profile picture
40 million 401K contributors bought the dip on their last payroll deferral. They will also do it again next week.
Skyfall7 profile picture
@Sundance Utah interesting observation I will look out for it. When’s payroll date in Us?
5ofDiamonds profile picture
"This Isn't The Time To Buy The Dip" @Mott Capital Management

I cannot buy the dip, even if I wanted to. I only buy individual businesses. So, depends on the business whose stock price had a dip. Even on green days for the market, there are some businesses which go on sale. And vice versa. If one is into buying markets via $VTI $SPY indexes, then they should continue to DCA. My 1c.
Go Lakers profile picture
I heard this story in 2009. Between the output gap in the US economy, the output gap in the global economy, the slack in the US labor market, and the enormous ability to down-cost in the global labor market, where is inflation, real inflation, coming from?

And remember that a spike in prices isn't inflation. - that's either a spike, or maybe a supply-side shock. Inflation is the tenured and consistent increase in prices, month-after-month, quarter-after-quarter.

Are we going to get that, with all of the aforementioned slack? Maybe a little but not in serious quantities. Not soon anyway.
@Go Lakers agree we might see a spike in prices due to demand normalization while supply still lagging due to pandemic constraints. Later this year the so called inflation will
begin to tamp down once supply catches up
Doctor_ECE_Prof profile picture
In the PPI diagram, I was trying to see if, during 2018, the PPI moved higher because of the FED fund rates were moving up (cost of business) or the FED started moving up the interest rate after PPI started percolating up. Without the vertical lines marking the times exactly, it is difficult to see.
It doesn't make sense to time the market with MSFT. Buying the dip is a concept for amateurs. There is no dip for the next few years (that you will be able to time just right). What will you do with your cash until your ephemeral dip shows up, anyway? Sigh - mark my words when you get it wrong. MSFT is a stock to steadily accumulate over time, not to buy for short swings. There are much, much better stocks to "buy the dip" with. Go see how the oil stocks and REITs are doing, if you want to play that newbie game.
Too many white papers that prove it's time in the market--not timing the market.

(This applies to retirees who should be in various cash / investment buckets).
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.