For those of you tracking the PaperMoney Russell 2000 RUT(828.37 +0.00) position, things are looking pretty darn good!

As they days continue to tick away the trade looks like it is going to hold up nicely. As I type this the RUT is making a run away from the session lows, pushing up above the 726 mark. It really looks to me like the index has hit a temporary bottom.

I pulled up a quick chart on prophet today in my thinkorswim tools, take a look.

You can see that the RUT has dropped below the lower acceleration band, however it has not continued its movement down. The RSI is still hovering around 25 indicating a very oversold situation. I expect that the RUT will rebound up back into the 730+ range today or over the next few days.

Heck, even Tim Knight is going long the RUT! (If you don’t read his blog Slope of Hope with Time Knight, you really should)

Given that we are just about a week and a half from expiration, time is on our side. The value of these options is going to start very rapid time decay and we should end up sitting pretty, walking to the bank. I do have this trade open in my personal account so I’ll be walking to the bank as well!

Anyhow, good luck out there. Things are looking pretty choppy and the VIX(17.76 +0.00) is going to be our friend for a while!

Update

Ouch… That turned around quickly. It looks like the bottom fell out for whatever reason on the RUT took a dive. The whole market actually took a bit of a dive so we’ll have to figure that one out. I’m still feeling pretty good about the whole situation as we still have a 35 point cushion. I will be watching closely this week and will have to determine the course of action as the days move ahead. Another 5% drop in the index seems too dramatic, however if the Bears really get a hold of things, it is possible.

Remember, the markets always drop faster than they rise!