Imagine buying a meme stock as it sells off, hoping to catch the next explosive rally.

But the rally never materializes. Instead of life-changing returns, you’re caught holding a worthless asset as it plummets in speculative desperation along with your hard-earned brokerage account.

This is what the kids call “BTFD.”

I’m sure you’ve seen the term online or on social media.

It’s an abbreviation for “Buy The F*cking Dip,” popular amongst meme stock and cryptocurrency traders.

Those communities often use the saying recklessly and with impunity. Their idea of “BTFD” is more akin to catching a falling knife.

Trading like this will destroy your wealth and well-being.

However, that doesn’t mean you can’t benefit from the market selloff.

You can buy the dip without losing your shirt. In fact, buying oversold quality stocks during bull markets is one of the best strategies for creating wealth.

And the market is gifting us one of those opportunities right now.

Let me explain…

This Bull Has Legs

Remember, bull markets persist for much longer and go much higher than most expect.

Here is one of my favorite charts from Bespoke Investment Group showing the duration and magnitude of last century’s major bull markets…

[Click To Enlarge]

It shows the data from this most recent bull market at the bottom. Since the table is about a month old, we can add 35 days and deduct roughly 5% from the data highlighted in yellow. But not much has changed.

If this bull market falls within the average, we still have another +40% and six months to go. But we're just getting started if it runs like several larger ones in recent decades!

Plus, plenty of other data points suggest this market is heading higher…

Earnings

Objectively, the most recent earnings reports were great!

As of a couple of weeks ago, the S&P 500 was on pace to post an earnings growth rate of +16.9% for Q4 2024. That was with the vast majority of companies having reported.

That number may come down a bit with the final reports, but if it is anywhere near there, it would be the highest year-over-year growth rate since Q4 2021.

The recent NVIDIA Corporation (NVDA) earnings report is a great example.

I have been very vocal about our concerns with NVDA stock.

Slowing infrastructure construction and increasing competition will eventually pressure their results. When that happens, NVDA stock will likely lose more than $1 trillion in market capitalization.

While I am confident this will eventually happen, it’s not happening right now.

The company just reported +78% year-over-year growth in revenue and +80% growth in earnings on huge numbers.

NVDA stock will not be cut in half off strong earnings results like these. The same is true for the overall stock market.

Interest Rates

Don’t believe the hype!

Investors were freaking out when interest rates went straight up after the Federal Reserve’s first-rate cuts late last year.

Have you seen what rates have been doing recently?

Here is the chart of the US benchmark rate (10-year yield)…

They have fallen one-half of a percent.

Critics will argue that this is because of concerns about economic growth.

However, earnings and GDP growth are just fine. I think rates rose last year in response to investor positioning – nothing more.

Yields have been stable for several years. (Note the horizontal green line on the chart.)

I highly doubt rates will play a critical role in the economy or the stock market if the 10-year yield hovers at these levels (+/-1%).

In fact, stocks will continue to benefit if they do!

Sentiment

It’s incredible how investor sentiment has deteriorated over such a short period.

I imagine the uncertainty surrounding the new Trump administration has had an impact. However, there also seem to have been some changes in the nature of the sentiment indicators.

The amplification effects of social media have likely led to much larger swings than in the past.

One piece of sentiment data we closely monitor is the American Association of Individual Investors (AAII) Bullish vs Bearish sentiment survey.

The AAII has been around for decades and is a nonprofit with 150,000 members who are individual investors. They are not meme stock traders but represent regular folks.

Recently, the spread between Bulls and Bears (black line on the chart below) fell to -40 in favor of the Bears, which has happened only a handful of times in the last 35 years.

Check out the S&P 500 chart and the table with forward returns following similar levels of pessimism…

In the near term (2-3 weeks), the next move in the stock market is a coin flip.

If you look six months out, though, the stock market is up 90% of the time. It is also up an average of +13.7%. Those are incredible odds.

Even the one time it didn’t work, the market was only down -0.35% a year later.

Since the bull market is showing no signs that over – the question becomes, what should you buy?

Your Shopping List

What has been interesting about this sell-off is that many stocks have not gone down.

The equal-weighted S&P 500 index (SPW) is outperforming the market capitalization-weighted S&P 500 (SPX). You may have seen this in the price action of your stocks.

SPW’s outperformance supports my bullish outlook and suggests that mega-caps have been hit the hardest. You want to buy these beat-down leaders.

Take a look at this post from X/Twitter showing the moves in the Magnificent Seven (plus AVGO) stocks…

Maybe these companies’ shares won’t lead the stock market in 2025. That doesn’t mean they aren’t great companies with strong competitive positions, incredible balance sheets, and cash flows.

If you are going to “BTFD” why not buy the BEST?

Remember that bull markets are the periods where you can change your financial future by being thoughtfully aggressive. That time is now.