IWM (+5%) is crushing $SPX month to date (+2.6%) with a nice bounce back in $PSCF… but the IWM:$SPX ratio remains below the June highs. IWM is approaching a key retest of the February highs: Note the February highs failed to make it back to the August highs and IWM rolled over, bottoming in March….
Read moreMystery Ratio Chart
Would you buy it down here? One of the potential benefits of a well-structured pair trade is to remove most of the market risk by going long one asset while short another asset. But in this case based on current correlations it’s a much higher probability that IF this ratio starts to move higher it’s…
Read moreAll the Small Things…
…that could turn into Big things: $SPX hit a key Fibonacci target (61.8% from the 2022 ATH) which is the same level where stocks peaked and rolled over last August. August was also the last time we saw $SPX get overbought (Daily RSI = 70). Currently less than 5% of the $SPX is overbought. $SPX…
Read moreUse Your Illusion
The current market environment is whatever you want it to be. It’s a great opportunity to reflect on what could go wrong versus what could go right. Then a couple of weeks from now review which side of the ledger was rewarded by the price action. QQQ QQQ broke out through resistance from last August,…
Read more(Equal) Weight of the Evidence
Back in March both $SPX and $RSP moved definitively above the 200-day. Now $RSP is back below it which presents an interesting divergence to monitor. Back in January the reverse situation was a bullish signal as $RSP cleared the 200-day and then $SPX caught up soon after. In addition to a period of time below…
Read more“Once More Unto the Breach”
$SPX retesting the 4200 range once more, specifically the February 2nd highs. 59% of the index is currently above the 200-day versus 78% on 2/2. The breadth and strength of individual stocks really stood out in February’s ramp and it wasn’t enough to sustain the rally, now we’re in a situation where we are attempting…
Read moreMarket Madness
$SPX stayed within the estimated range for the month of March with a strong close in the final week to hit the top end of the range. We had a mini flash crash in $KRE with the bank drama, $SPX corrected 5% between 3/6 and 3/13. Worst Sector: $XLF -12% Best Sector: $XLU -1.7% Then…
Read morePosition Sizing
A common approach is to invest 2% of your capital in a single trade. A simple flat % or $ amount can be helpful for ease and efficiency to set a baseline amount as your default size so you’re always ready to jump into a trade quickly if needed. Alternatively, you could risk 2% and…
Read more