Monday, October 24, 2011

Small Cap Heads Up (IWM; IWO)

I usually toil away amongst the larger caps, in the sometimes erroneous belief that giving up some information asymmetry for liquidity is a good trade-off.

Then the liquidity dries up, the high-frequency liquidity makers become liquidity takers and I have to explain myself to the powers-that-be, often with some variation of "that's only notional exposure".

This morning I left a comment at MarketBeat on the near-term potential for the market but right above me in the peanut gallery was this:
  • Oops, the Russell 2000 index just went bullish based on intraday pricing. It is now up over 20% from the intrday low of 10/4, read that good buddy?
    Huge hedge long the Dow short the Russell 2000 is still on, what happens when that gets forced off? 150% of IWM is short alone and that doesn’t count all of the direct shorting of Russell 2000 stocks.

With the DJIA up 100 (.85%) and the Nasdaq up 2.19% the Russell 2000 is up 2.97% and the Russell 2000 Growth (IWO) is up 3.27%.

See also:
"Fibonacci Analysis for the S&P 500" or "2011 is Diverging from the 1998 Template"
"S&P 500 Breaks Key Resistance" (SPX; SPY)