Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Wall Street's big slide makes retail investors wary to 'buy the dip'

Economy Apr 26, 2022 04:50PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A Wall Street sign is pictured outside the New York Stock Exchange amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., April 16, 2021. REUTERS/Carlo Allegri

By John McCrank

NEW YORK (Reuters) - U.S. investors have apparently been losing their appetite to "buy the dip" during Wall Street's recent slide, further eroding support for a market pummeled by worries over everything from tightening monetary policy to the war in Ukraine.

Options trading data tracked by Vanda (NASDAQ:VNDA) Research showed that purchases of calls – typically employed to express a bullish view of stock prices – have fallen close to year-to-date lows for the tech-heavy Invesco QQQ ETF, which tracks the tech-heavy Nasdaq Composite Index.

"There are initial signs that retail might be getting a bit tired of losing their money," said Lucas Mantle, a data science analyst at Vanda Research. "It's been a messy couple of weeks."

Retail investors emerged as a powerful force as the S&P more than doubled from its March 2020 lows following the COVID-19 pandemic. They helped fuel rallies in so-called meme stocks like GameStop Corp (NYSE:GME) and AMC Entertainment (NYSE:AMC) Holdings while also betting on shares of massive growth names such as Tesla (NASDAQ:TSLA) and Nvidia (NASDAQ:NVDA) Corp.

Buying the dip had become "a generally foolproof strategy" during that time, said Steve Sosnick, chief strategist at brokerage Interactive Brokers (NASDAQ:IBKR). Broader market selloffs were mitigated as investors raced to buy beaten up stocks.

A sustained reluctance to capitalize on stock declines now could make this an even more bruising year for equities. The S&P 500, which fell 2.8% on Tuesday, is down 12.4% year-to-date.

Data from Interactive Brokers pointed to further signs investors may be more hesitant to jump in during stock weakness, with margin lending at the brokerage steadily declining this year since peaking at the end of 2021, Sosnick said.

"All seemingly foolproof strategies run their course," he said, adding that "many who were conditioned to reflexively buy dips learned the hard way that not every dip was indeed a buying opportunity."

As market volatility has increased this year and the buzz around so-called meme stocks has eased, users at TradeZero have been less active, said Dan Pipitone, chief executive officer of the online brokerage.

"We went from a hyper-trading environment to now, more of a buy-and hold approach, while also taking on some intra-day trades ... on single names that may be less impacted by outside forces and things that are unpredictable like the war in Ukraine or the supply chain," he said.

Wall Street's big slide makes retail investors wary to 'buy the dip'
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email