We have written for months that we would buy the dip until we broke the 2009 trend-line. Well, today we broke the 2009 trend-line. Our last support idea was a break of 2009 trend-line and overshoot to 50SMA weekly, which worked well for a small day-trade today. However, the lack of buying on THE break of the big 2 year bull-market and 50SMA on weekly is without a doubt a red flag. Today is day 1 of the break. Head-fake is still an option and definitely on the table — the tale will be told not by just today’s action but by the next few days.
Our biggest focus now is whether dip-buying mentality has changed. If today is any indication then yes, indeed, dip buying has changed dramatically. But again, one day not enough to make a judgment and we’ll see how the rest of the week plays out.
For our trading we’re back to more defensive trading. If this is just a head-fake then we’re fine with missing any bottom and playing it safe. Our plan all along has been reversion to mean trades against the trend-line. Today we lost that strategy edge and again, as per the plan, we’re stepping back.
Clean break of $IYT two year trend-line. If it’s a head-fake, great, but we’ll wait and pay higher prices on long set-ups than buy the blood on a clear break.