“Buy The Dip” Is Dead: Retail Sells Today’s Market Bounce, 2nd Time This Week; Sells Nvidia

Two weeks ago we warned that the BTFD trade – that staple of every market dip in the past 3 years – appeared to be fading rapidly, as retail investors were demonstrating “persistent signs of weakness” following the start of the Iran conflict with weekly purchases decelerating by ~30% after defying seasonal patterns and making February their 3rd largest month on record; additionally, that Monday marked the largest retail net-selling day in single stocks in a month.

There was a silver lining: according to JPMorgan, despite the pullback, retail stock-picking choices – aside from reduced sizes – remained relatively optimistic: retail investors bought Tech Mega Caps (incl. ORCL pre and post-earnings), while cutting their exposure in energy stocks. Or, as JPM put it, “despite the market turning sour this month, driven by geopolitical developments and existing AI-related concerns spilling into equity and credit markets, retail investors continued to favor AI stocks, funding the trade by selling non-AI stocks.“

One week later, it went from bad to worse for retail demand, when that week’s Retail Radar note found that retail dollars invested shrank 15% week-over-week - and plunged 43% since the start of the conflict - with ETF purchases declining 22% week-on-week and single‑stock purchases holding  steady at a modest 45%ile.

Fast forward to today when we can (almost) officially declare the time of death of the BTFD trade. 

While many would have expected retail investors to jump at the opportunity to ride today’s early morning meltup which was driven by ceasefire optimism, Vanda Research writes that “the retail bid was notably absent today.”

As shown in the chart below, in the first 2 hours of trading, instead of buying retail actually sold $5.5mn of US-listed single stocks, in line with the muted activity seen earlier this Monday.

Today’s selling followed an especially ugly Monday: that’s when retail posted its first day of net selling in single stocks since November 2023, unloading $20.6 million in shares, according to Vanda Research. That selling came as the S&P 500 Index (SPY) rallied after Trump eased back on his threat to bomb Iran’s energy infrastructure, a backdrop that suggests even a rebound in the broader market is no longer drawing the same level of retail enthusiasm.

Echoing JPMorgan, Vanda said retail demand had been fading steadily as the conflict in the Middle East dragged on, and the firm described the trend since the start of March as one of gradually receding retail participation. Although individual investors returned to buying on Tuesday, picking up roughly $262.3 million in shares while the S&P 500 edged lower, the benchmark is still down almost 5% this month. At the same time, Vanda said systematic deleveraging has been underway, while buying from long-only and hedge fund investors has remained only modest.

There’s more: while two weeks ago retail sold stocks yet bought the badly lagging Mag7, and especially NVDA, today the largest company in the world stood out. Despite being the clear retail favorite over the past two weeks, the stock was seeing net selling of -$54.8mn in early trading, making it the most sold name in today’s session, even as price attempts to stabilise.

As Vanda concludes, “Overall, retail is not chasing the ceasefire hope driven bounce and is instead trimming exposure in its most crowded AI winner.“

In other words, instead of BTFD, retail is now STFR.