Dip buying when the market is continuing to fall requires confidence. I would not continue to dip-buy into a multi-month market collapse. One of the things I like about PDS is that when the market gets weak enough, the system will quit giving signals. The reason for this is simple. Since the system only buys stocks in an uptrend, a market that falls long enough will eventually erase most if not all uptrends.
Currently, the number of stocks in an uptrend (as quantified by the system) is 131. This metric has not seen such low levels since the summer of 2010.
We are looking at the bottom pane of the chart. This metric has also been a fairly good at marking bottoms.
Notice that beginning in 2008, the number of PDS setups was fewer than 100. It does build up slowly to almost 500, but then as the market begins to fall away again in June, the number of setups get fewer and fewer until on October 10th, 2008, there were only 17 stocks in an uptrend. Keep in mind that just because it is in an uptrend doesn’t mean that the system will buy it. It has to dip first, and when it does, it must not violate other criteria in order to count as a true Power Dip.
If the market continues to slide here, PDS will be issuing very very few picks, and subscribers will be mostly in cash. If the market stabilizes or bounces, the number of picks will climb. Either way, knowing this gives me the confidence to keep buying dips, even as the market is falling.Comments »