It appears to be a good time to buy into the market when IWM/SPY ratio RSI reached this low. at least for short term like several weeks. I think patience is still needed before a solid base is formed as the market still hesitates.
For clarification: I think you mean that the 14-week RSI of the ratio is the lowest in the last decade. The ratio itself IWM/SPY is certainly not at the lowest in a decade.
timwest
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And the purest way to capture this return is to put on both sides of the trade.
CosmicDust
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Can you please elaborate?
timwest
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To capture the return you would buy IWM and sell short SPY. That way your return is the difference in the return of the two ETF's. (And sorry I mis-read the title and commented before re-reading it = oops)
CosmicDust
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Thanks - that is safer as if both IWM and SPY are heading down, but SPY falls faster (still results a improving IWM/SPY ratio), there can still be some profit.
A-shot
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I agree, its the RSI of the relation, not of the indices. They both may tank, their relation may still be in tact.
CosmicDust
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Right - RATIO RSI as in the title.
pcmourao
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that is usually a bearish divergence
CosmicDust
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Maybe this time is different, I am not that confident either (and called for patience for a solid base, if ever). If you see past occurrences, market rallied at least for several weeks, some rallied for extended period of time.
Riverhorse
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There's two way to raise the IWM/SPY, either IWM gains or SPY drops, buy in is one of the options.