Preponderance of (or Preposterous?) Evidence

18 Haz

I was just proposing yesterday staying neutral in SPY (the S&P 500 ETF). The FOMC meeting today (Jun 18th) was a big-nothing burger (so far), which supports my (non)position, but we'll see. I will update that post when the time is right (ATH, 200dma, or bust).

Today, though, the IWM (the Russell 2000 Small Cap Index ETF) and, surprisingly, a potential short position.

First, the IWM (see below) is overbought on a weekly chart, with the Stochastics being above 80 (more on Stochastics and weekly charts at a later date). For now, let's go with IWM being a little overbought, in the longer-term view.



Now, let's switch to the big daily chart at the top and look at the evidence for going short;
- IWM never really got above it's 200-day moving average (purple line),
- That same level was consistent with a lot of resistance ~213 (yellow circles),
- IWM has trailed this whole rally.
- It has broken and somewhat retested a trendline (light blue) from this most recent rally,
- It bounced off it's 61.8% Fibonacci level (orange line, not my favorite indicator for ETFs, but I often sneak a peek),
- It's at its previous resistance high around 209 (blue circles).

On the not-bearish side;
- The daily chart is less overbought (this has to happen on weakness, though),
- There's (a little) support at 199 but not really again until 172,
- I still feel like the All-Time-High (ATH) is a magnet for the S&P (but IWM has trailed).

That's (a lot) more (and better) points for being bearish.

I'll go short (via a ~90 day ITM put position*) if IWM breaks below 207.50, between that and 202. If it opens lower than 202, I'll wait for a pull-up.

The stop will be a close above the 200 day.

The target is 172 (the previous tariff low), but I will lighten/tighten up (by selling OTM puts* and/or moving stop down) as IWM drops (if it drops).

It may seem a bit duplicitous to be neutral on SPY while being bearish on IWM.

But sometimes you have to go with the Preponderance of Evidence (or will it prove Preposterous Evidence?)

An update will be coming.

*Sorry for bringing up options. One can just go short IWM. I will explain my option choice one day.

My ideas here on TradingView are for educational purposes only. It is NOT trading advice. I often lose money and you would be a fool to follow me blindly.

13 saat önce

Not

IWM has rallied back up (along with the rest of the market) to it's short-term high, but it is still the "weaker cousin" to SPY, QQQ, and others.

IWM did break by alert price at 207.5 midday on Monday, during a news event that drove the market down briefly.

I forgot to mention (and again why you do NOT want to just blindly follow folks here) that I don't like to take positions midday. I like to close on the open and open on the close (sometimes visa versa). I don't like acting during the middle of the day. Sometimes it pays off, as it did here, and sometimes it was a mistake. I can live with that.

The setup, though different than I envisioned, is still valid. I will still look to short below 207.5, unless IWM, and the market, doesn't go significantly higher from here.