Buying This Dip Historically Makes Sense

On Election years, the stock market tends to behave in a certain way. We come into years like this expecting a rally early on, correction in the Spring, new highs through the summer with a rollover that bottoms out in October and finally a year end rally that goes out at the highs.

So far, 2012 has followed this path perfectly. And it looks like that typical correction after the summer got going this Tuesday. Here is the chart showing what Election Years historically look like:

And as we can see, this dip is usually the one we want to buy. Not sure how low we can go for stocks, so we're going to be patient. I think the action this summer has been constructive for some of the more aggressive areas. Defensive areas like Utilities, Staples, and Healthcare look scary here and I would want to touch them. I think this sort of action is solid and that helps with our longer-term bullish views. But we're not there yet for equities. Like I said on Tuesday, there are other asset classes out there with better direction. And like I first mentioned on August 14th, Silver and other precious metals appear to be one of those. Go check out those charts both on an absolute basis and also relative to equities.

Don't be shy to take the Dollar out of the equation

Source:

Can It Really Be That Easy? (Bespoke)

Tags: $SLV $GLD $SPY