Just when I thought I could get bullish, they pull back again!
While still EXTREMELY skeptical of this rally, I AM trying to get in the spirit. As I noted yesterday, we have aggressive new levels that we determined in our weekend review of our 5% Rule and still need to see some more progress before we can throw caution to the wind and BUYBUYBUY like it’s 1999. Despite our best efforts, the silly move in the Russell yesterday had me putting up a TZA hedge in our morning Member Chat:
RUT made a crazy move from 823 to 830 this morning for no good reason. TZA April $17 puts can be sold for $1 and the the $17/18 bull call spread can be bought for .42 for a net .58 credit for a $16.42 net entry with TZA currently at $17.73 so it’s a hedge with a bet against RUT 850 in 30 days.
At 1:23, I followed up by saying: “Look at the RUT now, stuck at the 1.25% line. Obviously, 840 is the 5% move up from the new 800 base so we take that and expect an 8-point pullback but the indexes have been routinely overshooting by 20% (848) and even 40% (856) before pulling back so now that we’re past 840 without a pullback, we’ll just have to wait and see but, no matter what, we should expect to see 832 re-tested eventually, which is why I liked the TZA play as they crossed that line this morning.”
As it worked out, that was the dead top of the RUT and we quickly got our break back below 840 and our ride down to 832 at the close. At 2:50, the Russell Futures failed to get back over 840 and my comment to Members was: “840 on RUT, this is the spot to press those shorts if ever.” As you can see from the above chart – we went very nicely off a cliff right after that. JRW, our Russell expert had called the bull run and was ahead of me at 2:29, calling “Back to cash!” and my comment, also at 2:50 was:
Cash/JRW – I agree. As I said last week, better to miss 5% of the next round of foolishness than
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