S&P 500 investors are bravely buying dips following sell-offs like never before. And they’re showing some of their favorite stocks to scoop up.
Six stocks in the S&P 500, including industrial plays Dover (DOV) and Teledyne Technologies (TDY) plus tech stock PTC (PTC), surged more than 3% from their 50-day moving averages Tuesday. And that’s after all these S&P 500 stocks fell this week to just 1% from their 50-day — or even dropped below it.
The 50-day moving average is a widely watched price level at which stocks seek support before falling more. And all these S&P 500 stocks highlight how investors continue to brazenly buy stocks — even after they sell-off to near or even below this key level. And that “buy-the-dip” mentality is running the entire S&P 500.
“The S&P 500 has shown exceptional resilience this year in bouncing whenever it has tested its 50-day moving average,” says Bespoke Investment Group.
The Amazingly Resilient S&P 500
Already this year, the S&P 500 closed below its 50-day moving average four times, Bespoke found. That’s roughly in-line with history. Typically it happens eight times annually, and we’re roughly halfway through the year.
But here’s the interesting part that shows how “buying the dip” is in vogue. In just one week following the S&P 500 falling below its 50-day moving average each time this year, it gained 3.95% on average.
That’s an astounding level of bounce back. Historically, the S&P 500 only inched up 0.06% in the week after dropping to the 50-day moving average since 1945. And this year’s average one-week bounce back ranks No. 1 for any year since at least World War II, Bespoke says.
And it’s not just a short bounce either. Following its drops below the 50-day moving average this year, the S&P 500 was 5.7% higher, on average, a month later. That’s much higher than the S&P 500’s typical 0.54% rise following drops to below the 50-week moving average going back to 1945.
But what kinds of stocks bounce back?
Looking At This Week’s S&P 500 Sell-Off
Monday’s sell-off didn’t quite knock the S&P 500 below its 50-day moving average at the close. The S&P 500 hit the 50-day and bounced intraday.
But a look at how some individual stocks behaved gives a taste of what buy-the-dip investors are doing now. Take Dover, a maker of a variety of industrial parts and supplies. Shares were up more than 20% this year up until the sell-off on Monday. The stock then slid to just 1% above its 50-day line. But that lured in the dip buyers, who pushed shares up 7.7% from the 50-day moving average.
Investors also like to think of S&P 500 tech stocks as buy-the-dip plays. But this week’s example isn’t a household name. PTC, a tech firm that helps companies upgrade their operations, Monday dropped to just 1% above its 50-day moving average, but since then it’s blasted nearly 6% from that key support level.
Even some S&P 500 stocks that closed below their 50-day lines bounced in a big way. Teledyne Technologies actually ended Monday 0.4% below its 50-day moving average. But on Tuesday, it already sprung up more than 3% from the 50-day.
Just don’t assume this buy-the-dip mentality will last forever. Savvy investors know to monitor other key market indicators, too.
“While the S&P 500’s ability to repeatedly bounce at its 50-day moving average this year has been impressive and even historic, enjoy it while it lasts,” Bespoke says. “We can guarantee that it won’t last forever.”
S&P 500’s Bounceback Kids
All jumped 3% or more from 50-day moving averages after falling to 1% or less of the support level on Monday
|Company||Ticker||Distance from 50-day moving average on Monday||% ch. from 50-day moving average now||Sector||Composite Rating|
|Realty Income||(O)||0.7||3.0||Real Estate||69|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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