RUT Outlook for August

In July we watched the RUT trend sideways in a pattern that was wildly applauded by those who had on Iron Condor positions. The July settlement price was not that far off of Junes, so some very nice sidways movement. In the bigger picture this could be construed as bullish since we are in an uptrend and the RUT is consolidating sideways. Yesterday we had even estabished a higher low on the daily chart. The aggressive selling today, although ugly, still held the uptrend (see the green dot). The tail on today's candle technically negates yesterday's higher low, but since we're still in an uptrend the bias is still to the upside. Next week we'll be watching the trendline very carefully. A break below might signal some more sideways consolidation before another move up. A close below the 820 area might signal the start of a larger move downward as this would break below June's lows.

Despite today's selling, keep in mind that the market to this point has been very resiliant and continues to rally back after these little pull backs. In the bigger picture this is still a bullish market and with the length of consolidation we've had in the RUT the past few months it's entirely possible that we have a large move to the upside once we break above the 855 level (this happened in the NDX after it's consolidation). As Index Iron Condor traders we must always manage the risks on both sides of our trades regardless of the trend or what we think "should" happen.

RUT 1 Yr / Daily Chart



RUT 5 Yr / Weekly Chart

Note that on the 5 Year / Weekly Chart that we are currently in the middle of the range and consolidating. On a longer term perspective this would construded as bullish, but be concious too that since we're in the middle of the range we can easily drift up or down and still remain in channel in this longer time frame. Note too that the 760/750 strikes are below this channel trendline that has remained intact for the last 4 years. That being said, also remember that a few weeks ago NDX broke through the top of a Weekly Channel that had remained intact for 2 1/2 years (until it was breached 2 weeks ago). These levels of support and resistance are no garantees of anything, but instead give us areas that we should be conscious of as we protect our positions and continue being good risk managers.