Stocks fell sharply yesterday on news of a worst-case-scenario election outcome in Italy. The S&P 500 fell 1.8% to close at 1,487, well below key support at 1,500. Even worse for the bulls the drop came after early gains, creating a 2.5% intraday reversal. Investors who have long claimed to be waiting to "buy a dip" were nowhere to be founder.
Matt McCall, founder and president of Penn Financial Group says the price action is positive even if it is maddening. "Every time we see any kind of pullback buyers jump in," notes McCall in the attached video. Despite breaking short-term support McCall thinks a drop is constructive. Markets that go up in a straight line can't be trusted. The short sharp declines are frustrating but part of the process of getting equities into strong hands.
Speaking of strong hands, plenty of folks have been clinging to cash in the hopes of getting a chance to "buy the dip." Those would-be investors have been stuck waiting for that correction for at least the last 10% move in the broader tape. McCall says investors on the sidelines are getting too cute with their entry points, missing chances to get long stocks.
"Anytime you actually get a 5% pullback the investor that's waiting for it when it happens (investors) are too scared because they read headlines that tells them it's the end of the world."
With the end of the world now upon us once again McCall thinks it's time to start buying. He likes the lumber sector, pointing to the iShares S&P Global Timer and Forestry Index ETF (WOOD) as a personal favorite.