Buy that dip, baby!

The new pastimes are calling the top of the stock market, commenting on Middle Eastern affairs and -- buying dips.

Stocks have shown remarkable resilience as investors snap up any drop in prices, even in the face of what seem like considerable risks -- an overbought market and a still potentially explosive situation in the Middle East.

Confidence in the economy, strong earnings, and inflows into equities from bond funds have been enough to push indexes to new highs on an almost daily basis even if light volume and slight gains show investors are not making aggressive moves.

Robert Auer, a fund manager at SBAuer Funds in Indianapolis said that after eight months of outflows his Auer Growth Fund had started to see inflows.

"I'm wondering if this is happening at American Funds and Fidelity and everyone else," he said. "I'm having to put it to work because we typically don't hold any cash, so it is causing me to do buying."

Bond funds have seen three months of outflows, the longest streak in more than 2 years.

Over that period USD 23 billion has moved out of bond funds while USD 16 billion has flowed into equity funds, according to data from the Investment Company Institute.

A rise in market interest rates has hit bond prices recently and is helping to spur those outflows. During the week the yield on the 10-year Treasury note rose to its highest level since April.

Rising yields have accompanied increasing optimism over the economy that will again be tested with retail sales and industrial output data during the week.

"Investors right now think the pullback is already here and they're not buying stocks - and not selling but not buying at a time of inflows is forcing the market to drift higher," said Thomas Lee, U.S. equity strategist at JPMorgan in New York.

Volume hit its lowest levels so far this year on Tuesday with just over 7 billion shares traded on the NYSE, Amex and Nasdaq compared to last year's average of around 8.5 billion.

Lee is expecting a pullback in the March and April time frame, with the S&P 500 rising to 1,333 before falling to around 1,250, taking the market back to where it was in late December.

"You really need to start buying at the 1,270 level," he said. "You need to be selective and getting ready to buy that dip."

The 1,333 level is the double-your-money mark from the bear market intraday low of 666.79 in March 2009 and is seen as a significant level by some investors.

Options market shows growing concern 

Even though the CBOE Volatility Index remains low, options investors are willing to pay more for protection against declines, which suggests concern about the market's direction, according to analysts at Credit Suisse.

Credit Suisse Fear Barometer Index, a measurement of how much investors are paying for put options compared with call options, hit new highs on Thursday due to continued put buying in S&P 500 options.

"While options prices are deflating overall, S&P 500 index traders are willing to pay handsomely for protection," said Jason Goepfert who publishes SentimenTrader.com an investor sentiment website.

Egypt is the place to be 

The Market Vectors Egypt Index exchange traded fund jumped as much as 8.7% after news broke that Egypt's President Hosni Mubarak would give in to demonstrators demands and step down after 30 years in power.

The ETF tracks underlying shares in Egyptian companies and is still 9% under its pre-crisis high.

Markets gave a cautious welcome to Mubarak's departure. Stocks rose and NYMEX crude oil futures fell to near USD 85 dollars a barrel, 8% below their crisis high over USD 92.

For the week the S&P 500 and the Nasdaq rose 1.4% and the Dow gained 1.5% the implications of the power shift were still uncertain and investors wondered about the longer-term outlook for Egypt and the wider region.

"Clearly oil is in the biggest play here. Think about if they decide to shut down the Suez Canal," said Cliff Draughn,chief investment officer at Excelsia Investment Advisors in Savannah, Georgia.