We’ve written for months about the big kahuna, the March 2009 trend-line, and how we would stay bullish until market proved otherwise with a break. Well guess what, it’s here. We believe we’re at the most important inflection point since the March 2009 bottom. Here are our thoughts:
1. $SPY is just a chart, like any other chart. Leave emotions out of it. We’ve been talking about the possiblity of the trend-line break in our last 5 posts and here it is. Now we’ll re-asssess and trade accordingly. We won’t change the plan or make excuses to deny the possiblity of the end of the bull market. It is what it is.
2. As we wrote before today is day 1 of the break and head-fake is still an option on the table. We want to see how the weekly bar closes on Friday. The next few days will be absolutely pivotal. A head-fake break down and a continued move up is definitely an option (and our most preferred one as we invariably make more money in bull markets).
3. We’re extremely oversold and way out of the Bollinger Band so a bounce is likely. That’s not that important. What is important is whether the bounce is sold (making it a dead cat bounce).
We look at this chart and at best we can be neutral due to the lack of close of the weekly bar but we cannot by any means feel bullish. This is THE trend-line we were trading against for months and now that it’s broken we’re not going to change our story. Sure we’d be happy to trade long for a bounce (especially $SPY 123, but if we bounce before that tomorrow we’d try to ride that too) but if you ask us our intermediate term opinion we’d say, neutral to bearish, at best, with a hold on judgement until weekly bar finishes on Friday.