I have to agree with you here. I'm looking for the nasdaq to possibly lead a downward move from here. (Please see H&S pattern in other QQQ thread). The Dow and S&P are definitely in the 'upper band' of the longer term channel, so it would be ill-advised to open new long trades at this level. Just my opinion, but a strong move above 900 (new highs) on $RUT is a good spot to invalidate a short idea from these levels. disclaimer, as always: Please do not trade off of my advice or commentary. These are simply my views/observations. You are responsible for your own trading decisions.
In my interpretation, it would be wise to avoid opening new longs at these levels. Please do not take any trading actions based merely on my interpretation of a possible resistance area between 1500 and 1505 on the $SPX at this time. You are responsible for your own actions.
After further consideration, it seems to me that watching IWM make a strong move above 90 would be a better way to invalidate a short idea here, instead of 900 on the indices/futures. In other words, loosen up your stops a bit when dealing with all time highs at a round number. There is a clear support, though, not too far below, in the 87 range (please confirm the exact number yourself), looking back to 2007. It will be interesting to see the interaction between the Nasdaq (already having moved down a little bit), and the DJI/SPX/RUT, all three of which appear to be sitting at or near resistance at this time. Please make your own trading decisions, my commentary is not trading advice.
Also watch 200 on MDY. Yes, this opens up the stop a bit, perhaps. This confluence of resistance suggests that we have to at least consider the possibility that this we are at, or very near, a swing top of some kind. Obviously, if short trades from these levels begin to work, we will have to watch support below us carefully, and watch how the price action develops. I'm tired of writing a disclaimer. Position yourself accordingly relative to your risk capital so you don't frell yourself. Watch your own ass. Me personally, I love shorting, as I hate everything and trust nothing. I can't sleep at night being long. With regard to the stock markets, I will always be far more likely to overleverage myself on a short trade. I do believe, generally, that the odds of a flash melt-up are much lower than a flash crash. I am unaware of any flash melt-ups in past times in the US stock markets. Having said that, I would not be surprised if the future, in my lifetime or the next, brings a flash meltup. How else could you frell the shorts? We have this quant for the masses nonsense now.. someone always has to lose, no? Practically speaking, it is obvious that, as a kindapermabear, my ideal position is cash until we have a downtrend. This will not stop me from trying to pick a top, though. It is an artform best left for those who love to endure pain. I am able to sometimes proclaim bull when analyzing the markets, but with regard to my own actual trading, in practice, this is difficult for me. I'll always have a short bias. Do not take any action based only on my commentary! It is 100% your own fault if you lose.
A trade that you cannot resist. Sell IWM at 89.70 and buy Weekly Feb 1 call for 0.48. You loss in limited to 0.78 plus commission. I believe IWM should drop more than 0.78 next week. (all are educated guesses that can go wrong but this is a high probablity trading).
The RUT is up 7% since this call. Closed at new all time high today. Why do you guys insist on fighting the trend?
Confluence of resistance not yet breached. That's all. It's just a theory. Risk/reward is favorable IMO. Yes, it is a counter-trend idea. IWM shows obvious resistance at 90, look at the long term chart and look for an upper channel.
The facts: 1- You are absolutely right that RUT is up 7% from my first call. 2- I also recommend to sell PUT to reduce risk which based on that the risk would be less than 7%. 3- I always recommend nibbling into a position and build up the position so considering that, the loss should have been about half of 7%. Now my question: Based on the trend and what you see in the market and assuming that you have no position, which side you would take on IWM? Long? Short? If long, what would be your stop. I hope I don't hear that "I don't predict and go with the trend". I already know that. You see the trend and want to open a new position. What would that be? My question is so simple and clear.