February 9th, 2024

Small Caps are currently breaking correlation. For the moment, the RTY has disassociated itself from the 10 YR, rebounding back up to 2000 while the ZN remains at the year’s low and 10 YR Yields are hitting year highs. The RTY’s return to the rally, along with NQ and ES, has instilled more confidence in the bulls, consequently extending market rallies.

As I mentioned in my prior note, ES and NQ are not markets to fade, particularly with the RTY’s return to the rally. It is uncertain whether this is a temporary bounce in the RTY or the beginning of a new trend. The charts suggest a temporary bounce for now – one not to be faded. With the RTY closing above their YTD VWAP, I covered my puts at yesterday’s close. Currently, I don’t see any potential for new swing positions in any market. I perceive a day trader’s market on the long side in the Indexes and on the short side in ZN.

It will be interesting to observe what transpires in the Indexes while ZN drops to their year lows. It might bring some weakness back to the RTY, possibly even the ES, but the NQ is uncertain. We will have to monitor how the market responds, if that occurs I think that the new lows for the year in ZN could temporarily derail the rally in RTY and ES and we could potentially just be in a big consolidation in this years range.

It’s Friday, don’t ruin the weekend. Trade small and smart. I will be watching and waiting.

Cheers, DELI