The incredible 'Buy the Dip' market of 2014
The stock market's unprecedented consistency in 2014 generated a trading maxim that echoed on trading floors and social media on a daily basis: Buy the dip. And traders see no reason to abandon this simple, but money-making credo in the new year.
With no losing streak longer than three days this year, any decline in the index proved a buying opportunity for investors. The never had a losing streak shorter than four days in any other calendar year.
As a result of the bull run, the index closed at a record on 20 percent of the trading days this year, more than any year since 1995.
The Federal Reserve's "support and transparency" about monetary policy "allowed investors to have the confidence that the market isn't going to be upended by any change in interest rates," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
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Analysts also said low bond yields and economic weakness abroad gave consistent support for U.S. equity markets, a trend likely to continue as the interest rate stays low and growth slows in other major countries.
"The fact that the U.S. economy is so much stronger than other economies, money has been flowing into the U.S. from overseas," said Marc Chaikin of Chaikin Analytics.
In 2014, the same "buy the dip" trend applied to intraday action as well. A chart from Bespoke Investment Group showed that during the day, investors consistently bought on a dip in the market around 3:30 p.m. ET.
"As long as money is easy, which it is now, you can expect to see the 'buy the dip' trade in play," said Bespoke co-founder Paul Hickey.
A satirical Twitter account called "3:30 Ramp Capital" highlighted that end-of-day effect in a blog post that showed how purchase and sale of S&P 500 futures in the last 30 minutes of trading would outperform the market annually by 26.6 percent.
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Highlights of social media users discussing the "buy the dip" trend on Twitter with the hashtags" #btd" and the almost not safe for work version "#btfd" are below: