My “Buy the Dip” Indicator For Coming Out Ahead In 2025

“The stock market is a device to transfer money from the impatient to the patient.”

— Warren Buffett

February 4, 2025— I already know what you’re thinking.

You’re thinking that, next Monday, the market is going to open lower again like the last two Mondays. And that it’ll be the time to buy.

But don’t. Here’s why…

Yes, markets opened down nearly 2% for two consecutive Mondays, on the back-to-back news of Trump’s tariffs and China’s DeepSeek AI.

Who knows what next Monday will bring? But if it brings a big drop at the open, chances are you’re thinking about buying the proverbial “dip.”

Maybe it’s not a Monday. Maybe the market’s next 2% drop comes out following the next big piece of economic data. At this point, though, I wouldn’t be surprised if you’re still thinking about making a short-term profit from buying that dip.

But that’s not a good strategy, for reasons I’ll explain below. There’s a better approach to take instead.

Actually, there are several, so let’s go with the top two things you can do now to prepare for a market downturn and come out ahead.

First, I’m working under the assumption that you’ve already taken some tech profits off the table. Addison included a brief note from me in yesterday’s Daily about one way to rotate your passive investments away from a strong focus on tech stocks. Remember, if you own a S&P 500 tracking fund, the Magnificent 7 stocks represent 28% of your total. Yikes!

Investors have been conditioned to buy market dips heavily over the past 15 years. Since the end of the financial crisis, zero percent interest rates made cash in the bank and bonds unattractive. Stocks were the best game in town.

Even the Covid crash, which saw stocks sink 30% peak-to-trough, recovered within the span of a few months. It was one hell of a dip, but holding onto your stocks or even buying more during the panic looked like the wise choice within just a few months.

But as they say in finance, past performance is not indicative of future results. Eventually, buying the dip will fail. Stocks will fall further than expected. And then fear will truly take off.

So today, while markets are still relatively calm, but getting increasingly volatile, let’s look at two tools you can use to protect yourself.

First, it’s important to recognize that you shouldn’t blindly buy the dip. Rather, you should look at moving averages to get a sense of where stocks trade today.

Here’s where the S&P 500 stands, as of yesterday’s close:

Turn Your Images On

Stocks have started to trend sideways over the past two months, and a further drop may be in the cards.

We can see that stocks have slowed in recent weeks, and the S&P 500 is trading right around its 50-day and 20-day moving averages.

The red line far below is the 200-day. That’s where you should look to buy, when buying the small dips in the market fails. In a true Grey Swan event, the 200-day moving average will act like a magnet, pulling down the stock market.

Historically, the S&P 500 hits its 200-day moving average at least once every year. But it failed to do so in 2024, one of just three such years. A pullback from there would also be close to a 10% pullback, another level that’s also typical to see in a given year.

Charlie Munger once noted that if you only bought stocks when they fell to the 200-day moving average, you’d easily beat the market over the long term. Such an opportunity may just present itself in the months ahead.

That makes it the ultimate “buy the dip” indicator you’re really looking for, not just a Monday stock selloff from the weekend news.

Even then, if you want to be really cautious, you still don’t buy the dip once stocks hit the 200-day moving average. Rather, you buy the rip afterwards, when stocks reverse higher. That’s a sign that the market fear has truly waned, for now, and the returns for waiting for a rip higher are almost as good.

With market uncertainty rising, it’s likely that the market’s next move is lower. But you can expect investors to look to try and bid up stocks when they fall about 5% from their recent highs, as they did in December.

But that’s just one tool to handle rising market volatility…

The second tool? To prepare a watchlist. That’s simply a list you may create of great companies worth buying during a bear market.

For instance, software giant Microsoft will largely be unaffected by the rise of DeepSeek. It’s a software player, not a hardware player. And they’ll still sell copies of their programs globally, no matter what tariff rates exist.

If you don’t write down a list of stocks like Microsoft worth buying when the market hits its 200-day moving average, you’ll be caught up in the panic thinking about more downside rather than the bargain the market is offering now.

This watchlist strategy positioned me to buy shares of MicroStrategy in 2022, during the last bitcoin bear market. It was the only real proxy for investing in bitcoin prior to the ETFs that launched in 2024.

While shares traded weakly for some time, they ended up delivering massive returns in the past 18 months as the crypto market took off. You won’t come out ahead immediately buying steep market bargains. But you will come out ahead over time.

And, of course, there are always stocks that are likely to buck a market downtrend. Grey Swan Investment Fraternity members have access to our latest research on companies that can continue to grow, and should trend higher, even amid a market downturn.

For now, it’s time to prepare for the storm ahead. Stocks have just started to show a taste of volatility. There’s more to come, and more uncertainties await besides the recent DeepSeek drop and the latest tariff rumblings.

So, take some tech profits off the table, watch the market’s moving averages, and develop a list of stocks you keep saying you’ll buy when they’re “on sale.” The sale is coming.

Regards,

Andrew Packer,
Grey Swan

P.S. Thanks to all our readers who continue the conversations we start in these Daily letters with your thoughtful emails. Addison reads all your emails, and likes to share the top ideas that come in.

Regarding the tariff tiff that has recently hit markets, reader Scott opines:

Addison,

Isn’t it interesting that taxes (in the form of tariffs) are the centerpiece of the MAGA movement?

For decades, we’ve been told that free trade, capitalism, and democracy work for everyone. You’ll get ahead if you work hard, create value, and play by the rules. But that’s not what happens. Instead, wealth and power concentrate at the top, while people are left working harder every day just to stay in place.

The system isn’t broken—it’s designed this way. Economic stratification isn’t a bug; it’s a feature. Tariffs and trade deals, policies and regulations, aren’t about fairness or efficiency; they’re about control. Governments don’t create value; they allocate it, deciding who wins and who loses. Those decisions overwhelmingly benefit corporate elites, financial speculators, and political insiders.

As a result, America has shifted from a nation of ‘producers’ to a nation of ‘consumers.’ The drive to create, build, and innovate has been replaced with dependency on wages, debt, and cheap imports. And when people feel powerless to change their circumstances, they either tune out, fight each other, or look for false saviors (enter King Trump).

The partisan fight of left versus right is a deliberate distraction. What the elites have been striving so painstakingly to conceal is the long game of the takers pillaging the makers. The problem isn’t capitalism or socialism—it’s a system that rewards rent-seekers over value creators. The game will remain rigged until people realize the truth and act to break the rent-seekers dominance.

The real question is: What will it take to play a different game?

It seems we are going to find out.

Send your comments to addison@greyswanfraternity.com. We read all emails. Thanks in advance for your contribution.

“The stock market is a device to transfer money from the impatient to the patient.”

— Warren Buffett

February 4, 2025— I already know what you’re thinking.

You’re thinking that, next Monday, the market is going to open lower again like the last two Mondays. And that it’ll be the time to buy.

But don’t. Here’s why…

Yes, markets opened down nearly 2% for two consecutive Mondays, on the back-to-back news of Trump’s tariffs and China’s DeepSeek AI.

Who knows what next Monday will bring? But if it brings a big drop at the open, chances are you’re thinking about buying the proverbial “dip.”

But that’s not a good strategy, for reasons I’ll explain below. There’s a better approach to take instead.

Actually, there are several, so let’s go with the top two things you can do now to prepare for a market downturn and come out ahead.

But as they say in finance, past performance is not indicative of future results. Eventually, buying the dip will fail. Stocks will fall further than expected. And then fear will truly take off.

So today, while markets are still relatively calm, but getting increasingly volatile, let’s look at two tools you can use to protect yourself.

First, it’s important to recognize that you shouldn’t blindly buy the dip. Rather, you should look at moving averages to get a sense of where stocks trade today.

Here’s where the S&P 500 stands, as of yesterday’s close:

Turn Your Images On

Stocks have started to trend sideways over the past two months, and a further drop may be in the cards.

We can see that stocks have slowed in recent weeks, and the S&P 500 is trading right around its 50-day and 20-day moving averages.

That makes it the ultimate “buy the dip” indicator you’re really looking for, not just a Monday stock selloff from the weekend news.

But that’s just one tool to handle rising market volatility…

The second tool? To prepare a watchlist. That’s simply a list you may create of great companies worth buying during a bear market.

So, take some tech profits off the table, watch the market’s moving averages, and develop a list of stocks you keep saying you’ll buy when they’re “on sale.” The sale is coming.

Regards,

Andrew Packer,
Grey Swan

Regarding the tariff tiff that has recently hit markets, reader Scott opines:

Addison,

Isn’t it interesting that taxes (in the form of tariffs) are the centerpiece of the MAGA movement?

For decades, we’ve been told that free trade, capitalism, and democracy work for everyone. You’ll get ahead if you work hard, create value, and play by the rules. But that’s not what happens. Instead, wealth and power concentrate at the top, while people are left working harder every day just to stay in place.

The system isn’t broken—it’s designed this way. Economic stratification isn’t a bug; it’s a feature. Tariffs and trade deals, policies and regulations, aren’t about fairness or efficiency; they’re about control. Governments don’t create value; they allocate it, deciding who wins and who loses. Those decisions overwhelmingly benefit corporate elites, financial speculators, and political insiders.

As a result, America has shifted from a nation of ‘producers’ to a nation of ‘consumers.’ The drive to create, build, and innovate has been replaced with dependency on wages, debt, and cheap imports. And when people feel powerless to change their circumstances, they either tune out, fight each other, or look for false saviors (enter King Trump).

The partisan fight of left versus right is a deliberate distraction. What the elites have been striving so painstakingly to conceal is the long game of the takers pillaging the makers. The problem isn’t capitalism or socialism—it’s a system that rewards rent-seekers over value creators. The game will remain rigged until people realize the truth and act to break the rent-seekers dominance.

The real question is: What will it take to play a different game?

It seems we are going to find out.

Send your comments to addison@greyswanfraternity.com. We read all emails. Thanks in advance for your contribution.

The CBDC Anti-Surveillance State Act, if passed, will ensure that this program doesn’t morph into anything ominous, at least right away.

But there’s always another crisis coming down the pike. And governments always sound reluctant at first to claim emergency powers, at least until a fearful populace demands they do so.

So don’t count out a CBDC yet – but at least this is one crisis that can be kicked down the road a few years.

For now, crypto investors are finally getting Congress to deliver on the regulatory clarity they’ve wanted for years – and it points to more gains for crypto in the months ahead.

But it will require ongoing vigilance to ensure the crypto dream doesn’t become a nightmare.

Looking at your gold stock holdings with an eye to how much share dilution they’ve done is critical to your investment success.

Share dilution is real across any industry. But how shares are being diluted, and what they’re being diluted for matter.

In the resource space, that means paying close attention to the value of any announced acquisitions, the total shares outstanding, and how that company is performing relative to its underlying resource.

That can make the difference between a good investment, a middling investment, and a killer investment.

In 2023 and 2024, gold prices trended higher. That trend has continued this year, with gold prices rallying over 20%.

In prior years, gold mining companies have been conspicuously absent from that rally. But in 2025, they’re starting to move up – and at a faster pace than gold:

Gold mining stocks should perform better than gold during a rally. Why? Imagine a gold company has total cash costs of $1,500 per ounce.

At $2,500 gold, they make a profit of $1,000 per ounce. If gold rallies to $3,500, a 40% rally, the miner’s profit goes from $1,000 to $2,000 per ounce – a 100% jump in profits.

That’s the power of investing in gold mining companies. Aside from the first half of 2016, this is the best setup for gold mining stocks since the early 2000s. It’s not too late to buy gold stocks if you haven’t done so yet.

Truth matters.

Free and fair money, whether measured in gold ounces or satoshis – a one-hundred-millionth of a bitcoin – can compel a governmental and political system to stay honest. Or at least within some rails.

Fiat currencies, which are determined by those same governments, provide unchecked power, including the ability to keep some in power despite clear abuses of it.

History shows time and again that it’s the power to destroy.

Public confidence has been hit with a one-two punch of hefty inflation the past few years, and a sense of a two-tiered justice system that projects those in power who were harming children.

In a time of rapidly-declining trust in traditional institutions, it’s more important than ever to make sure you hold gold and bitcoin.

I know I sound like a broken record – but every day, there’s about 3 billion more reasons to hold those assets. And that’s just the daily increase in America’s federal debt.