Bearishness is creeping up as seen in the uptrend in all measures of volatility. The short term measures of volatility are still below the longer term measures, but the VXST is close to crossing over VIX.
The momentum of the uptrend has been weakening since March 7th, when the percentage of stocks trading above their 20 day moving average hit a very high level of above 90% intraday.
Our RUT trade is still on to the end of this week. The 1110/1120 call spread has been violated, but since has come back down into an area of profitability. A single good down day this week would allow us to close it out at near full profits. If the market moves up, we will need to roll it out a couple weeks.
The RUT chart shows that the small caps have not been able to gain significant ground in to the low area of the trading range that existed for nearly two years (the area of the blue box). Recently the RSI (bottom line graph on the chart) hit a very high number that has corresponded in the past with pullbacks to at least the lower Bollinger Band on the price chart currently around 1066, about 3% lower).
With options expiration next week, and two days of reversals from highs in the mornings to close at the lows of the day, I suggest we can expect more weakness this week.
