Tuesday, December 3, 2013

RUT Russell 2000 Small Caps Daily Chart Bull Flags Upward-Sloping Channel Overbot Negative Divergence Price Extended

The RUT is pumped higher this year from the upside orgy in the biotech spec stocks. Thus, weakness in biotech will indicate weakness in the RUT moving forward. The brown upward-sloping channel is in play with price tagging the top rail and receiving a spank down from the negative divergence (red lines). The chart indicators show a loss of upside oomph in July-August but price continued higher on the momo. Price respected the bull flags on the way up (blue, purple and maroon). The last bull flag pattern (maroon) shows leg one from 1050 to 1125, 75 handles, then the sideways consolidation flag with a drift lower in price, textbook bull flag behavior, and the second leg begins at 1075 that targets 1150, achieved.

The pink dots show the price extensions above the moving averages that always result in mean reversions at least back to the 20-day MA, now at 1113, and perhaps the 50-day MA, now at 1099. Price has not back kissed the 200-day MA at 1014 for one year's time, unprecedented behavior. This is all due the Fed, BOJ and other central bankers printing money to keep the stock markets elevated. No one can hold back the ocean forever. Price will want to tag the 200-day MA moving forward, perhaps on the next down move. In addition, price will need to spend time under the 200-day MA to match the time spent above the 200-day MA. Projection is lower prices moving forward with lower targets at 1113, 1099, 1078 (lower channel rail) and 1014. Of course the moving averages and channel line are all sloping upwards so these targets will slightly increase as each day passes. The market bears should have their day moving forward. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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