Russell 2000 / IWM / SRTY Trade

*The market update charts promised in the last post are coming, I wanted to get this out to you first though.

I have explained many time that the market doing what we expect as it has last week, this week, more broadly, etc IS NOT reason enough to enter a trade, WE HAVE TO HAVE THE SIGNALS.

This is why I still haven't entered a Financials short like FAZ, because the signals weren't there.

Yesterday however the signals were therefor a short on the R2k / IWM which I chose SRTY (3x short Russell).

Remember that the Russell should be the leader of any rally or risk on move. Over the last few days I have been pointing out the Dow's better 3C relative performance (large caps vs the R2K's mostly small caps).

While I was putting together the charts to go with the last market update, I ran in to the IWM again and saw what are continued negative 3C signals, flying in the face of short term signals in the other 3 major averages.

The SRTY position entered yesterday is at a small gain, nothing exciting yet, but if the IWM drafts the market intraday, I would consider adding to the SRTY position, if you like it and don't have any coverage on the IWM and mall caps in particular, you might consider using any price strength in the IWM that is a result of the IWM drafting the broad market (as there is no underlying strength in the IWM itself) to consider a partial position or an add to. I'll be looking at it for an add-to position as the current position is 2/3rds of a normal size position for this very reason.

Here are the charts for the IWM and some confirming SRTY charts as well.

IWM

 1 min is bucking the overall intraday market trend and is leading negative here. This is not important as far as the probabilities for the success of the trade go, this is more of a timing indicator and being able recognize a false move or a head fake move which can be used to get the best entry and lowest risk.

 The 3 min chart is still an intraday timeframe, but a bit more important and we see negative divergences in the IWM at all important highs and a current leading negative divergence in the red box, leading divergences (represented by a box around the 3C indicator-white for a positive or red for a negative divergence ) are always stronger than relative divergences (represented by arrows usually).

 10 min is showing price / 3C confirmation at the green arrow and then a leading negative divergence and another deeper leading negative currently.

 The 15 min chart- although with any other indicator a 15 min chart sounds like a not very influential timeframe, with 3C it is very influential and represents fairly large underlying smart money trades. This leading negative divergence is very important. It's pretty rare that we see a divergence like this and price does not respond, which in this case would be to the downside.

SRTY (3x short Russell 2000/IWM) *Be careful with asset allocation as a short position in small caps will move a lot like a short position in the IWM, you usually don't want too much correlation in your portfolio for risk management purposes.

 On a 3 min intraday we see a huge leading positive divergence in SRTY, which is the opposite of the IWM so this is also confirmation of the signals in each.

 10 min leading positive divergence, agin an important timeframe-the longer the timeframe, the heavier the accumulation or distribution.

 15 min leading positive divergence, again since SRTY is the opposite of the IWM and the IWM is leading negative and this is leading positive, the two ETFs are confirming each other on another timeframe, this increases probabilities of a successful trade.


30 min leading positive in SRTY.

Hopefully you can see why I liked SRTY so much yesterday and continue to. I left a little room in case I could add to the position at a better price (long SRTY).