Buy This Dip?

There has been a lot of noise made by all the usual "I bought this dip" suspects over the last few trading sessions. I can't stop myself from saying: do not end up holding the bag!

Many of you probably remember what I said in my October 18th post "IBM - Crucial Test" - I said that if IBM breaks down, this bull market is over. IBM is one of the most influential stocks (in my opinion), because it measures the health of enterprise market. Well traders, IBM is toast.

Let's look at the charts. First, I would like to draw your attention on how IBM correlates with Dow Jones Industrial Average, even closer than Apple with S&P 500. 
Secondly, multiple supports have been broken. A few box extensions have been reached, and double top at that level has occurred. Many major long-term moving averages have been breached, with monthly 21 sma about to go as well. On weekly I showed a 4-yr channel, which is now gone. Leg 3 of 5-wave decline is under way. On daily I showed multiple horizontal supports to trade against, in case you were lucky to be short. Cover some of your shorts at those levels and trail your stops on remaining portion to above resistance, as the price will want to go back up to backtest (like recent 200 dsma backtest, which was successful).

It is too early to predict, but I think that IBM gave us heads up - bear market may have begun.

click on charts to enlarge