Saturday, September 6, 2014
RUT Russell 2000 and INDU Dow Industrials Daily Charts Cyclical Bull and Bear Markets Dictated by 150-Day MA Slope
Three weeks ago, Keystone highlighted the flattening of the RUT 150-day MA and then the Dow followed suit. The 150-day MA slope is a key cyclical signal (weeks and months) for any stock or index. If the 150-day MA is sloping higher, the index or stock is in a Cyclical Bull Market. Long traders are happy as the stock trends higher and any dips can typically be bot. If the 150-day MA is sloping lower, the index or stock is in a Cyclical Bear Market. Short traders are happy as the stock trends lower and any rallies can be sold. Check the 150-day MA slope for all your current positions to see what side of the street you are on with each.
For the RUT, let's give the benefit of the doubt to the bear's since they have maintained a flattening 150-day MA for two months. The Dow, however, signaled a cyclical bear beginning but that signal lasted all of two weeks before the bulls decided to take the blue chips higher again feeding off the Fed and other central banker stimulus. The Dow returns to a cyclical bull pattern slapping the bear's in the face.
The small caps have rolled over first and the markets are deciding if they should follow the RUT and roll over to the downside, or, if the RUT should throw in the towel and start injecting the Fed easy money into its veins and catapult higher back into a cyclical bull. The outcome ahead for the RUT 150-day MA is extremely important. If the 150-day MA starts sloping higher again for RUT the bears are in for a few more weeks of beatings.
Use the long skinny red box on the RUT as key upper and lower boundaries. If the 150-day MA falls under the lower red line and moves lower, the cyclical bear market is locked in and the broader indexes will follow the small caps lower. If the 150-day MA pokes above the upper red line and moves higher, the cyclical bull market has returned for the small caps and the broader indexes will likely remain elevated and printing new highs for several more weeks. If the RUT price can quickly drop under the 150-day at 1153 this will drag the critical moving average lower for bear victory. If the RUT price remains above 1153, the 150-day MA will continue higher placing the bulls in the victory circle. High drama. 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.