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Buy The Dips

Shaky start to the markets yesterday as the major indexes pulled back from their highs.

After opening higher in the morning, the markets just kind of ran out of steam as profit taking set in.

Quite frankly, I'm fine with that. From a technical perspective, the Dow, the S&P, and the Nasdaq, all left gaps on their charts from Friday's higher open and close. These types of 'common gaps' often need to get filled before the market can proceed meaningfully higher.

Granted, 'breakaway gaps' and 'runaway gaps' don't subscribe to this theory. And if the gaps left behind are any of those, even better. But Friday's gaps look to be common gaps indeed. And a modest retracement to fill those gaps in would only serve to strengthen the technical picture as the market waits for more earnings to come in this week.

After six weeks of fantastic gains, a little backfilling and profit taking is not out of order.

But with over 1,200 companies reporting earnings this week, I don't expect the market to sit idle for long.

Dips have been far and few between. So in this bull market, I'm a big proponent of buying the dips when they present themselves.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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