My Trade Plan Details:

• IWM Feb 2, $188 puts near $2.00
• Stop: Close IWM above $196
• Target 1: $186
• Target 2: $182

My Reasoning:

A “tired” market doesn’t necessarily mean things are headed lower.  I often see a market like this trade sideways for a while and digest the recent gains.  That can result in a lot of back-and-forth trading action, and it can be very frustrating for traders as they wait for a clear direction.  

When I look at the bigger indexes like QQQ and SPY headed into this week, I still think things are undecided on the direction.  Things are clearly leaning towards the bears right now, but when you look under the hood at market leaders, they still are looking strong.

Now, when you look at interest rates and bonds, you see a different picture.  The Fed’s stance of “higher for longer” when it comes to rates is clearly having an impact on interest rates right now.

That is causing traders to reverse bets on interest-rate-sensitive stocks as they wait for the Fed to make the next move.

One of the most sensitive stocks to rates right now is IWM, which is and ETF that is loaded with regional banks and small-cap stocks.

Those money-losing companies react very poorly to higher rates, and you will see that when you look at the IWM chart over the last few weeks.

I hate to say it, but I see all the signs that IWM is going to continue to head lower.  

So this week, my top idea is…

My Bullseye pick this week is to buy (IWM) puts.

My plan for the week is to get started with a half-sized position on the IWM puts I am targeting (listed below), somewhere near the market open.

Then, I want to add to this trade if IWM trades up near $193-194.