February 7th, 2024

Weakness in RTY. Apologies for the late update – I just got done with my annual blood work and am finally settling down at my screens. The first thing that stands out is RTY’s failure to rally alongside ZN (10 YR), exposing its underlying weakness. Given that RTY’s movement this year has been influenced by ZN, RTY’s sell-off during ZN’s rally this morning underscores its vulnerability. As of now, I haven’t shorted RTY on a swing basis using Options, but I’m currently holding some 1920 Puts due to expire by the month’s end. RTY is struggling to regain its YTD VWAP. (1976), and a daily close above there would get me to cover my Puts.

As for the rest of the market, both ES and NQ remain enigmatic. They’re attempting to climb but there’s an apparent lack of interest in buying at the highs, and yet they can’t seem to keep down either. Despite any minor setbacks they may face, these cuts aren’t breaching any significant technical levels, so they’ll likely continue to ascend despite RTY’s weakness.

When it comes to index trading, I usually prefer selling the weak market or buying the strong one. At present, both ES and NQ seem bullish, but they lack clear leadership and pose risk management difficulties. The sensible play continues to be selling rallies in RTY, as even when given reasons to rally, they can’t seem to grasp the opportunity.

Keep trading small and smart.

Cheers, DELI