Before I begin this is not a post declaring everyone to buy the dip and get max long all the riskiest of things.
David Rosenberg tweeted this morning about the US10y breaking the 200D Moving Average. Now I had to make these charts this morning because I don't use moving averages.
USD crossed the 200d MA in the last week of March and made a local high 31/3 in the following 6weeks it fell -4.17%. If your trend following algo triggered a buy on the first close above(white dash line) still just a smidge underwater 3.5 months later.
Gold closed above the 200d on 17/5 peaked 1/6 and then proceeded to close out June down -8.66%. Again if your trend follower triggered you are still red on this trade.
I am in no way saying that the bond market is wrong and you should be shorting bonds with full leverage. What I am saying is based on the examples above, if you were not positioned for this move in yields you could do yourself an injustice to panic sell/buy carte blanche change allocations based on this move today.
Now I will admit I wish it started Friday and we didn't have this washout today but I have commented recently about where the pain trade is with @Petr Pinkhasov
- Lots of those that thought they missed it on Friday have had stops triggered today.
- People who perhaps missed the last 200pt SP500 move will feel vindicated "see we told you this didn't make sense" and push any risk-off trades they have long bonds long dollar shorts maybe.
A bounce over the next few days will hurt those that added to risk-off and those that had risk-on stop losses triggered.
Do not override your trading plan on a panic day.