Buying the Dip at All-Time Highs: Why I Keep About Half My Account in Cash
The S&P 500 is sitting near a record high. Right now about half of my account sits in cash as dry powder, earning interest while I wait for a pullback. The other half is working in active trades: SPX put credit spreads at 1, 7 and 45 DTE, plus a few Slingshot trades, and I manage those positions every day. I don’t know when the next dip comes. Nobody does.
It feels like the odds should favor a drop from a high. I checked that against more than 75 years of S&P 500 data. The answer is more useful than a yes or no, and it’s the reason I keep so much cash ready.
Try the Buy the Dip app. Enter the cash you’ve set aside and get ten limit prices below the 52-week high for SPY, QQQ or IBIT, with dollars and shares for each.
Open the Buy the Dip app → SPY ladderQQQ ladderIBIT ladderWhere the market is today
SPY closed at $772.31 on Oct 28, 2026, about 1.2% below its 52-week high of $781.62 (set Oct 6, 2026). The S&P 500 index closed 1.0% under its record close. That’s close to the top, not a dip yet.
The Buy the Dip app’s SPY ladder starts at that 52-week high. Its first three buy levels today: −5% at $742.54, −10% at $703.46, −15% at $664.38. Nothing fills until price gets there.
Today’s implied volatility context for SPY:
Do the odds favor a drop from an all-time high?
No. I took every S&P 500 record close from Jan 3, 1950 to Oct 28, 2026: 1,538 of them. Then I checked where the index was later, and compared that with all trading days.
| S&P 500, 1950–2026 | Higher later: after a record | Higher later: any day | Median return: after a record | Median return: any day |
|---|---|---|---|---|
| 1 week later | 57% | 57% | +0.2% | +0.3% |
| 1 month later | 60% | 62% | +0.7% | +1.1% |
| 3 months later | 69% | 67% | +2.4% | +2.7% |
| 6 months later | 76% | 71% | +5.4% | +5.2% |
| 12 months later | 75% | 75% | +11.3% | +10.7% |
A year after a record, the S&P 500 was higher 75% of the time, the same as after any random day. The next month or so is a touch softer after a record (higher 60% of the time vs 62%), but the difference is small, and three to six months out, records actually did a little better. Records tend to cluster, because a rising market keeps making them.
So the honest version of the idea is not “the market will probably go down from here.” It’s this:
But a dip along the way is likely
The end point is usually higher. The path almost never is a straight line. Here’s how often the S&P 500 pulled back after a record close:
| Pullback after a record close | Within 3 months | Within 6 months | Within 12 months |
|---|---|---|---|
| 3% or more from its high | 85% | 94% | 99% |
| 5% or more from its high | 49% | 74% | 92% |
| 10% or more from its high | 10% | 28% | 53% |
| 20% or more from its high | 2% | 4% | 13% |
| 5% or more below the record-day price | 28% | 39% | 48% |
| 10% or more below the record-day price | 5% | 14% | 27% |
Two ways to measure it, and both matter for dip buyers:
- From its high. Within 12 months of a record, the index fell at least 5% from its high (the record or a later, higher one) 92% of the time, and at least 10% 53% of the time. That’s the way the Buy the Dip app measures, from the 52-week high.
- Below the record-day price. A dip to 5% under the price on the record day came 48% of the time within a year. The market often climbs first and pulls back from higher up.
- Any lower close. Within 12 months, the index closed below the record-day price at some point 94% of the time.
That’s my honest read of the odds: a 5% dip at some point is very likely, even though the market usually ends the year higher.
How often the S&P 500 pulls back
- 5% pullbacks: 92% of calendar years from 1950 to 2025 had one. Counting record high to low, there were 74 in 77 years, about one a year.
- 10% corrections: 54% of years had one; 26 from a record, about one every three years.
- 20% bear markets: 17% of years; 11 from a record, about one every seven years.
- The median year saw a decline of about 10% from a peak to a low.
The cost of waiting in cash
If a dip is that likely, why not hold everything in cash and wait? Because the dip often starts from a higher price, and the market keeps paying while you wait. I tested it on SPY with dividends, from 1993 to 2026 (725 record closes). The waiting cash earned the 13-week T-bill rate. If the dip never came within 12 months, the waiter bought anyway.
| Wait up to 12 months for a dip of… | Dip came | Waiting beat buying | Average 12-month return: buy now | Average: wait | Average: half and half |
|---|---|---|---|---|---|
| 3% below the record | 62% | 62% | 14.1% | 9.9% | 12.0% |
| 5% below the record | 48% | 49% | 14.1% | 8.8% | 11.4% |
| 10% below the record | 29% | 32% | 14.1% | 7.4% | 10.8% |
Waiting for a 5% dip beat buying at the record only 49% of the time, and it cost about 5.3 percentage points of return on average over the year. Waiting for 10% was worse. Splitting the money landed in between.
The “half and half” column is a simple stock test: half bought SPY at the record, half waited for the dip. It isn’t a model of my account. My working half is in options trades, not shares, so read the table as the cost of waiting in cash, not as my results.
Why I keep about half in dry powder
The data says buying now wins on average. So why do I hold any cash? Because I’m not trying to win on average every year. I’m trying to never be forced into a bad decision.
- Half working means my money isn’t sitting out a market that’s usually higher a year later. That half is in SPX put credit spreads at 1, 7 and 45 DTE and a few Slingshot trades, and I manage them daily.
- Half in dry powder means that when the likely 5% or 10% dip shows up, I have cash to buy it instead of watching.
- The cash earns interest while it waits, which shrinks the cost of waiting.
- I never have to sell or close a trade to buy a dip, and the cash cushion means a deep drop doesn’t knock me out.
As an advantage player, I learned that surviving the bad stretches matters more than squeezing every bit out of the good ones. A split is a bet I can live with either way: if the market rips, the working half keeps earning; if it drops, the cash half gets to buy. I also skip new trades on Fed mornings; here’s why I wait until after FOMC.
Where the cash waits: T-bills
Dry powder doesn’t have to sit idle. On Oct 28, 2026, the 13-week Treasury bill yielded about 4.11% (coupon-equivalent, U.S. Treasury). Common places to park dip-buying cash:
- Treasury bills, bought directly or through a broker. Short, safe, and easy to roll.
- A Treasury or government money market fund, which tracks short-term rates and can be sold any trading day.
- A high-yield savings account for cash outside the brokerage.
One thing to check: some brokers’ default cash sweep pays far less than T-bills. Rates change, so look at the current yield before you park the cash.
How the Buy the Dip app puts the cash to work
I built the Buy the Dip app so the dip plan isn’t a mood. You enter the cash you’ve set aside for dip buying, and it lays out ten limit orders below the 52-week high:
- SPY: a buy every 5% down to −50%, set from the S&P 500’s bear markets since 1945. Open the SPY ladder.
- QQQ: steps of 5.5% down to −55%, from QQQ’s own history. Open the QQQ ladder.
- IBIT: deeper steps, set from bitcoin’s history. Open the IBIT ladder.
The first buys are small (5% and then 7.5% of the cash), and the biggest buys sit at the depth where most bear markets have stopped. That fits the odds above: a 5% dip from the high, where the first rung sits, came in about 9 of every 10 years, while most of the cash waits for a real drop. After a new high, the ladder resets from the new high.
What I do at all-time highs
- I don’t go all cash. Records are normal in a rising market.
- I keep my split. About half in cash as dry powder, about half working in SPX put credit spreads (1, 7 and 45 DTE) and a few Slingshot trades, managed daily.
- The cash earns interest in T-bills while it waits.
- My buy levels are set in advance, anchored to the 52-week high, so a dip triggers a plan, not a feeling.
- I don’t chase. If price runs higher, the anchor moves up and so do the buy levels.
Pullbacks are also when I like selling puts at prices I’d be glad to own; that’s the idea behind the Slingshot Trade. And why I stick to the most liquid tickers is in why I trade SPX, SPY, QQQ and IBIT options.
The risks
- Cash can lag for years. In a strong market the dip may start from much higher, and the ladder may barely fill.
- Dips can become bear markets. Buying the dip means buying while prices are still falling. A fill can show a loss for months.
- History isn’t a promise. These are past odds on one index. The next pullback can be smaller, bigger, or later than any average.
- Interest rates change. The T-bill yield above is one day’s rate.
Sources and method: S&P 500 (^GSPC) daily closes from Yahoo Finance, Jan 3, 1950 to Oct 28, 2026, price only (no dividends); a record is a close at or above every earlier close; “from its high” means the largest close-to-close decline from a running peak inside the window. Calendar-year declines use full years 1950–2025. Cost of waiting: SPY adjusted closes (dividends reinvested) from Yahoo Finance, Jan 29, 1993 to Oct 28, 2026, with waiting cash earning the 13-week T-bill rate (^IRX). T-bill yield: U.S. Treasury Daily Treasury Bill Rates, Oct 28, 2026. SPY close: Cboe delayed quote; 52-week high from Yahoo Finance.
FAQ
Should I buy the dip?
Buying dips works when you have a plan and cash you won’t need. The trap is waiting for a dip with all your money: from a record high, the market was usually higher a year later. I keep about half my account in cash earning interest and the other half working in active options trades, and I buy in steps as prices fall, so I’m never all in or all out.
How often does the S&P 500 pull back 5% or 10%?
From 1950 to 2025, 92% of calendar years had a decline of at least 5% from a peak within the year, and 54% had one of 10% or more. Counting record high to low, there were 74 declines of 5%+ in 77 years (about one a year), 26 of 10%+ (about one every three years) and 11 of 20%+ (about one every seven years).
Is the stock market more likely to fall after an all-time high?
No. Across 1,538 S&P 500 record closes since 1950, the index was higher 12 months later 75% of the time, the same as on an average day (75%). What is likely is a dip along the way: in 92% of cases it fell at least 5% from its high at some point in the next 12 months.
Buying the dip vs dollar-cost averaging: which is better?
Both keep money in cash longer, and cash usually lags stocks. In our SPY test from 1993 to 2026, waiting up to a year for a 5% dip from a record (cash earning the T-bill rate) beat buying right away only 49% of the time. Dollar-cost averaging spreads buys over time; a dip ladder spreads them over price. I use the ladder for the cash I’ve set aside; the rest of my account is working in active options trades.
Where should I keep cash while waiting to buy the dip?
Somewhere safe, liquid and paying interest: Treasury bills, a Treasury or government money market fund, or a high-yield savings account. The 13-week T-bill yielded about 4.11% on Oct 28, 2026 (U.S. Treasury). Check your broker’s default cash sweep rate; some pay far less than T-bills.
What should I do when the stock market is at an all-time high?
Don’t panic and don’t go all cash. Records are normal in a rising market. Decide how much stays at work and how much is dry powder, put the cash somewhere that pays, and set buy levels in advance so a dip triggers a plan instead of a feeling.
Is this financial advice?
No. It’s education from my own process. Past market behavior doesn’t guarantee future results, and a dip can turn into a long bear market. Only use cash you won’t need for years.
Ready to set your buy levels? Pick a ticker, enter your dry powder, and the app lays out every rung from the 52-week high.
Open the Buy the Dip app → SPY ladderQQQ ladderIBIT ladder