Saturday, December 13, 2014

RUT Russell 2000 Small Caps Daily Chart Negative for 2014 H&S Pattern

The RUT turns negative on the year, again, oscillating above and below the flat line for the ninth time with the bears back in the driver's seat. The year started at 1163.64 and the current print is 1152.45 about 11 points below. The negative divergence (red lines) and overbot conditions create the spank down as December began. The indicators are weak and bleak sloping lower so lower lows in price would be expected after any bounce in price. The RSI and stochastics are under 50% in bear territory. The H&S shown by the brown lines is in play with head at 1192, neckline at 1155 so the downside target is 1118 exactly where the gap at 1120-ish sits. There is a gap above current levels serving as a target for a recovery move.

The 20-day MA is 1172 and the 50-day MA is 1143 so use this range as a bracket. Bulls win above 1172. Bears win under 1143. The death cross remains with the 50-day MA under the 200-day MA but the 50-day is sloping higher. The 200-day MA is 1150 and price is using this moving average as support sitting only two points above at 1152. Thus, the pivot from here on Monday is key with bulls winning above 1150 and bears winning below 1150.

The 150-day MA slope is very important since it tells you if a stock or index is in a cyclical bull or cyclical bear market pattern. Since small caps typically lead the broad market a lot is on the line with the RUT's 150-day moving average. The green and red lines were superimposed on top of the 150-day to illustrate whether the critical moving average is sloping up or down. The cyclical bull market rally is running full steam ahead in the beginning of the year with the 150 climbing vertically all the way into summer time. The Fed wine is flowing like water as bullish traders are drunk as skunks celebrating at yacht parties. But trouble started in late July-early August as the 150-day slope rolled over turning negative ushering in a cyclical bear market (for weeks, months and perhaps a year or two ahead).

The bulls fight back with a positive slope in late August-early September but then the bears slap the bulls once again with a negative slope for the 150-day MA during the September-October selloff predicting a cyclical bear market ahead. That was not meant to be due to the power of the central bankers. As explained in prior articles, the collusion of the global central bankers, starting with Fed's Bullard in mid-October, created the historic recovery rally. Every global central banker jumped in to goose the world's stock markets including the Fed, BOE, BOJ, PBOC and ECB. The power of the move sends the 150-day MA slope positive again to continue the cyclical bull market.

The thin black lines encompass the entire oscillation of the 150-day since it turned negative in July. The true winner going forward will be identified by whether the 150-day MA moves above 1155 or below 1140. If the 150-day moves above 1155 a cyclical bull market will guarantee more stock market highs ahead. A drop under 1140 for the 150-day MA locks in the cyclical bear market pattern for the months ahead guaranteeing a lower stock market for a sustainable period. The 150-day MA is at 1148 in the middle of the 1155 and 1140 boundaries. Who will win? The stakes are high since this outcome will determine the fate of the entire broad market over the next year. The 150-day MA should make its firm decision as 2015 begins. 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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