TVO Market Barometer 6/27/17: BTD always works… Until it doesn’t

When the futures are up, the bulls come out in droves to celebrate. When they’re down, the tune suddenly changes and then the “futures really don’t matter” anymore. Well, on Tuesday, the futures did cause the market to open lower. And after rising later in the day, just as the “dip buying, told ya the fute’s don’t matter” bulls began yet another victory dance, all that changed and the bubble finally burst.

It’s been over 6 weeks since the last across-the-board distribution day, and a greater than 50% volume increase on 6/23 told us a big move was coming. That same day, our General Investment Strategy shifted to sell mode and spared our long-term portfolio holdings from today’s drop. Unfortunately for our options account, we dove in today with the rest of the dip buyers and our calls are now well in the red.

Wait, but doesn’t BTD always work? The important thing to remember as a trader is not to write off something just because it doesn’t go your way once, twice or even several times. Even the most well-tested strategies with a 70% success rate or more have streaks in both directions, and maybe this one has just taken a pause for now. Until it resumes, all we can say for sure is that oversold markets can become even more oversold, a previous low is a strong support area until it isn’t, and the futures do matter… until they don’t. -MD

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