Looking at my charts for RUT and SPX (I typically trade monthly spread options on the RUT index) and they both suggest strongly to me that we are headed for a downtrend in RUT over the next 2 months before settling around 770-825. If RUT breaks 770, could go all the way to 600 if its a really bad drop. Normally I wait for dips and then sell puts below the dip settling, but haven't had the balls for it the past few months as RUT has just gone so high. Now I think it is due for a big reversal. Probably going to buy the same spreads I would normally sell. Thoughts? I don't have a good enough feel for SPX to target where it may settle, but the two often move similarly.
It all depends on where the suckerz are. The Market is an organism that systematically shakes money out of the accounts of emotional gamblers, and gives it to disciplined backtesters. Knowing this, where might the Organism of Pain go next? The back test can help, but what really matters is where the stops are. The latest drop lured in weak shorts, which must now be liquidated. :eek:
I totally understand you but VIX can stay low for a long period of team even years and market is at new high.. hard choice
I would not be arrogant like the poster a few above talking about weak longs being liquidated.. I am looking at weekly charts. I usually place trades that last over a month. I don't focus on short term noise.
What were you looking at to suggest a downmove? I was looking at market profile which suggested a bullish bias, especially if we saw a follow through, which we did
These make me expect a short term pull back over ~2 months http://i171.photobucket.com/albums/u319/gnode_photos/r1_zpscf9d0497.png http://i171.photobucket.com/albums/u319/gnode_photos/s1_zpsff49e84c.png
That is a good start. You can't see the inverted head n shoulders, price above 50 sma and long term up trend if you're too proud to look at price, now, ONLY. The short smash may be the end; sometimes strong trends end like this - with a huge squirt after much anticipation. :eek: