The market looked strong but artificially so all day. I took out three more short positions near the highs of the day, all small. I can’t predict market direction, except to say I think the RUT goes back to 930 before it rolls over again. It could also go sideways and consolidate or sell off tomorrow with the sequester news. From our present position, a retracement to 867 or 847 would be violent. When the bars starts to grow fast in that direction, close long Delta positions and ride out the move with the Delta negative positions. This would be a rational strategy, but I wonder: Would we have a chance, us gooey-ware types with enamel teeth? Our silicone sisters move so fast.
The last minute sell off at the close sends out a warning signal. But as with many signals, I’m not entirely sure of the meaning. My best estimate is that machines wanted the upside liquidity but didn’t want to face the possibility of dramatic sell off due to political contestations or other news.
The RUT weekly calendar trade is up 15%, but I couldn’t close it. After conversation with Trading Group 7 at Sheridan Mentoring, it appears my back week longs are not under strong accumulation (i.e., low open interest); for they are March(4) and not a monthly. We agreed that to buy longs in the monthlies gives one more options and better fills. Live and learn.
Stay tuned– things are gonna get interesting right about now.