Buy the Dip or Sell the Rip?

Is the market still in “buy the dip” mode, or has it shifted to “sell the rip”? Jeff Praissman and Prosper Trading Academy’s Scott Bauer break down rising oil prices, inflation, Big Tech earnings, and the market psychology shaping investors’ next move.

Summary – IBKR Podcasts Ep. 410

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Hey, everyone. This is Jeff Praissman with the Interactive Brokers Podcast. It’s my pleasure to welcome back to the IBKR Podcast Studio Scott Bauer from Prosper Trading Academy. Hey, Scott. How are you? 

Scott Bauer

Jeff, fantastic. How about yourself? 

Jeff Praissman

I’m good. And for our listeners, every other Wednesday, Scott comes into the studio, and we talk about the market, the past week or so, and what’s coming ahead. It’s a quick five to seven minutes, just so everyone can kind of catch this on their lunch break or whenever they’re around and just kind of get a good market update. So, you can find more from Scott at prospertrading.com, as well as on our website under Education, and you can find previous podcasts and webinars from Scott and Prosper Trading Academy. Hey, Scott, so last week, oil prices surged as US-Iran tensions escalated, and Treasury yields actually rose right along beside them. 

So, with investors starting to price the idea that energy-driven inflation could keep the Fed from cutting or even push it toward hiking, what does this energy-inflation-rates linkage kind of tell us about how fragile the broader disinflation story really is? 

Scott Bauer

Oh, it’s everything. It really is because the Fed has to analyze this data on the whole and not just month to month. So, if you go back—and this is backwards-looking in the rearview mirror—those numbers for CPI and such looked pretty good because, from a month ago, we saw fuel prices down. Now they’ve risen again, and this is kind of this ebb and flow back and forth. So, it’s a little bit difficult for the Fed to be data-dependent on how inflation is reactive to fuel prices when we’re seeing fuel prices literally trade on tweets and just social media commentary. So that’s a tough one. 

Jeff Praissman

Yeah. And then we actually had a stronger-than-expected new home sales report. But the last couple weeks, both the S&P 500 and Nasdaq had weekly declines. So, what do you think this is saying about market psychology when we’re starting to see some solid housing and earnings data, but we’re getting a broader kind of risk-off sentiment? 

Scott Bauer

You know, Jeff, for a very long time we saw “buy the dip.” Now we’re in an environment—I’m not gonna say “sell the rip”—but we’re now in an environment that this is really a sell first. So, on rallies, we are seeing the broader sentiment being, “Okay, I need to be on the sell side first.” I think that’s gonna change really soon. I think that’s gonna change as we get a little bit deeper into earnings reports. And if we continue to see a really good story about the economy, about these companies, then that’ll flip to buy the dip again. 

Jeff Praissman

I feel like we could go into the T-shirt business. Buy the dip, sell the rip. We could— 

Scott Bauer

Just flip it over. Exactly. 

Jeff Praissman

I mean, we can go on the boardwalk and hawk some T-shirts and make some money. But you led me perfectly to my next question, ’cause this week brings a heavy load of earnings from several of these large tech companies. I think Apple’s Thursday. And given the recent pattern of this CapEx guidance sort of overshadowing revenue strength, do you think the market’s tolerance for AI spending’s gonna kind of keep up? Or do you think it’s gonna just stay concentrated in tech? Or are they gonna be kind of more forgiving at this point with it? 

Scott Bauer

I really hope, for the market’s sake, that it stays within the tech sector, maybe branches a little, because if we start to see increased CapEx spending everywhere else, I think that puts a lot of psychological pressure on the market. 

Jeff Praissman

Mm-hmm. Yeah, and then, as always, we have a full slate of economic data. I feel like every time we talk, there’s always a full slate of economic data. And we’ve got the Fed meeting coming up in a little bit today. Which macro release this week do you think will have the most potential to move markets? And does it matter more than the upcoming Fed headline itself later today? 

Scott Bauer

Yeah, sure. So, we have the Fed headline, you know, in a little bit today, and they’re gonna say what they’re gonna say about the data. But I think tomorrow’s PCE report is going to be very critical. Critical in the sense that, is it going to support what we saw with CPI, that things have calmed down a bit? The conundrum with that is, if it does show that, has it slowed down because of those energy prices coming down also that we just saw? So, PCE is going to be really important as maybe the driver of, okay, is inflation maybe under control this month? 

Jeff Praissman

Right. All right. Well, Scott, as always, this has been great. For our listeners, again, you can find more from Scott at prospertrading.com, as well as on our website, interactivebrokers.com. Go to Education, click on Podcasts and Webinars. And Scott, until next time, thanks for stopping by the Interactive Brokers Podcast Studio. 

Scott Bauer

Thanks so much, Jeff. Have a great one. 

Jeff Praissman

All right, you too. 

Scott Bauer

Bye-bye.