IWM / SRTY Update

SRTY is one of my main core short positions and it has done excellent for me, a +9% gain when I closed it early last week and swapped URTY for 1-day as I suspected a stronger IWM bounce, however after seeing the first day of the move, I closed URTY for a 3.5% gain and re-entered SRTY which is just off a +13% gain since re-opening it last week.

Although this is an asset I'd usually use to swing trade, I want broad coverage during the first leg down in the market (a larger leg down than this) and then decide which assets look the best. Thus it's not often that I will close SRTY even if I suspect drawdown because as you saw today, the market is discounting events with a lot of fear which is something it never did on an intraday basis over the last 5 years which means the market is growing increasingly unpredictable to the downside which is the direction I want my core positions aligned with, the direction of highest probabilities (based on the charts).

If there was a solid 5 min divegrence in the IWM and of decent size (not just 2 or 3-days-we've already seen 10 min positive IWM divergences that were well over a week long lead to a small bounce of +2.12%) then I'd consider taking SRTY off the table to preserve gains more than anything, but at this stage in the game I really don't want to overtrade chasing oversold bounces with core positions.

Here's what IWM and SRTY look like and this is why I decided it's better just to hedge with IWM calls for now.

 IWM 1 min looks good intraday and I doubt it's a coincidence that this is happening just before the 2 p.m. op-ex pin is taken off and the market tends to move in different directions through the close.

 The 2 min chart looks good, but again, it's still only a 2 min chart and still only 2-days max of divergence.

The 3 min chart is leading so there has been quite a bit of repair in a short period today, but not of significant size.

And the 5 min chart, while more positive, it is not anything I'd base a swing trade or longer off.

These intraday charts of SRTY has me considering booking gains there before they were lost, but again I have to consider the bigger picture.

SRTY 2 min

There is no SRTY 3 min divegrence and...

SRTY 5 min is still nearly perfectly in line with the trend.  Bottom line is there's no objective evidence to take off the position even though I suspect a bounce is on its way. We have to remember how fast this market has sold any price strength the last 2 weeks and how quickly things can turn south, especially with escalating situations across the globe.