We have a couple existing bearish trades in the etf that tracks the Russell 2000, the IWM, read Match 7th here and March 11th here. There is little that I have heard from Central Banks in the last week that lead me to change my fundamental view on why small cap stocks should continue to under-perform large caps in the U.S., and it would take me a couple more days like today to cry uncle. Yeah, I’m stubborn.
There was one fairly large options trade today in the IWM where it appears one trader was not stubborn and possibly cutting losses on an outright bearish bet, or a defensive hedge.
When the IWM was $108.30, a trader sold to close 40,000 of the April 103/93 put spreads at 61 cents, receiving $2.4 million in premium.
Here is my quick technical take. Looking at the 6 month chart, the recent consolidation between $105 and $109 looks like a bullish flag, but I am not likely to run for the hills until we see a successful test and close above of $110:
A look at the 8 year chart of the IWM from its 2009 financial crisis lows shows the important of which way this flag breaks, as a move lower would once again place it below the long term uptrend:
While the S&P 500 is flat on the year, the Russell 200 is still down 5%, and down 16% from its all time highs made last spring, vs the SPX which is only down 4% from its all time highs.
Even if I get stopped out near term, this will be one to go back to.