The 20 DMF closed slightly negative and signals that large players are not much attracted anymore to buy strength and up gaps in this extended move. Intraday negative divergence with IWM price was one of the most striking since we started monitoring the RT 20 DMF right at the start of this uptrend one month ago. Perhaps it is the illustration that market makers are indeed trying to pin IWM near 79 for options expiration Friday, but institutional participants prefer to wait for a pullback before resuming their buy programs.
This seems to foretell that some kind of selling pressure is brewing at least for a minor retreat. It is comforting the IWM robot short position.
The limit entry for a secondary entry today is rather high (79.85) and above the initial stop of the robot’s position (79.23). But this is simply due to the multi-pivots risk-reward relationships after IWM closed above Monthly R2 (78.05). A close below 78.05 would have kept a short limit entry of 77.50 for today. Hence, trading and closing Friday below MR2 would be another positive signal from a risk-reward perspective for short setups. I already mentioned the other day that MR2 had a 66% probability of marking the high for January.
GDX had an amazing down move that almost hit our trailing stop (51.06). Only 5% of GDX trades are exited on stop hits so it came close to a worst-case scenario. But the worst may be over judging by the massive large players buy programs into the close. The GDX MF jumped from a low of 0% back up to 0.60% in the last 16 minutes of trading alone.
These MF zigs and zags leave us wondering if sellers or buyers have the strongest conviction? Or is this another opex pinning exercise? It feels like a bear trap to me. Anyway, the robot is holding its long position but avoids entering new positions for now.
Billy
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