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IWM TNA Short Trade Update

Today's Fed-induced rally has the potential to damage the bearish technical case for the TNA/IWM short trade, but hasn't done so yet. In fact, today's marginal new high is another divergent high.

Essentially, the small caps have traded sideways for the last 3 weeks, with the IWM/TNA short trade actually still profitable earlier today before the Fed jawboned the markets higher, with the $RUT now trading just over 2% above the March 4th entry price & still comfortably below the suggested stop of a daily close above 1130 in the $RUT (Russell 2000 small cap index). Today's marginal new (recent) high in QQQ/TQQQ is also another divergent high. I'll post an update to QQQ as well as some of the other trade ideas later today.

IWM 60-minute March 29th

IWM 60-minute March 29th

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Mar 29, 2016 3:07pm|Categories: Completed Trades - Short, Equity Market Analysis|Tags: , , , |8 Comments

8 Comments

  1. pangblood March 29, 2016 3:14 pm at 3:14 pm

    These Fed induced rallies are annoying as hell, takes several days to correct and meanwhile decay screws ya double time

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    • rsotc March 29, 2016 3:53 pm at 3:53 pm

      pangblood- Agreed, agree sometimes (sometimes only hours to correct) & agree or disagree depending on whether you are long TZA or short TNA (the preferred proxy for the $RUT short trade). The choppy, sideways action over the last few weeks works in the favor of a TNA short while against a TZA long. I realize that some have have cash (non-margin) accounts or their broker doesn’t have shares of TNA available to short, hence, I had also stated in the original short entry post that TWM (2x short RUT) would probably be a better alternative than TZA on this trade as the decay isn’t as bad.

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  2. TXUTrader March 29, 2016 3:17 pm at 3:17 pm

    Thanks Randy.

    Do you still see divergence in Wilder’s RSI? I believe today’s reading (74.9) is a higher high from previous high of 73.65 that we saw on March 18th.

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    • rsotc March 29, 2016 3:58 pm at 3:58 pm

      TXUTrader- Today’s marginal new (recent) high in IWM put in another divergent high from the March 7th reaction high on the RSI, as drawn by the orange lines. While the MACD, so far, has made lower lows from that point and the March 18th reaction high, the RSI didn’t from there but more importantly still has that even larger divergence from the March 7th high.

      Also note the divergence on the 13/3-ema histogram as well not to mention the fact that IWM closed just shy of the bottom of the very significant Dec 31/Jan 4th gap. Should it enter that gap from below, the top of the gap would most likely cap any further advances or else the bearish case will start to diminish rapidly.

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  3. lee1 March 30, 2016 6:38 am at 6:38 am

    I commented a few weeks back that I thought central banks will keep the markets going higher and again I wonder whether charts are meaningful in such artificial environments. I thought all time highs were just around the corner regardless of what charts may have been saying as the market seems driven only by central banks and they clearly are doing everything possible to keep the markets moving north. I do not think Yellen will allow the market to fall while Obama is still in office. I do not know whether one should just get on the bull bandwagon or what as this certainly feels like a bull market as every tiny dip in the market is bought up and we continue higher. It is frustrating sitting in cash having missed this huge run thinking this could not be sustained but I am scared to start chasing now even though things seem to be so bullish. I can just imagine how bullish the media and the masses will become if we reach all time highs shortly.

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    • GM March 30, 2016 7:45 am at 7:45 am

      ‘I do not think Yellen will allow the market to fall while Obama is still in office’

      Man, such a weird thing to think or write.
      Was Bernanke able to save the markets in Bush Jnr’s last year?
      Of course not.
      It’s all BS, they have zero control, when sentiment turns (it already has in the grand scheme of things) watch out.

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  4. Shambo March 30, 2016 8:54 am at 8:54 am

    and funny thing is, pretty much everyone agrees that a .25 rate increase, or even several of them, will have almost zero real impact on corporate P/L.

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  5. jegersmart March 30, 2016 10:22 am at 10:22 am

    I don’t agree with that at all, however it does depend on the company in question.

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