Thursday, October 1, 2015

RUT Russell 2000 Small Caps Monthly Chart Three Black Crows

The monthly charts receive new prints since September ended yesterday. The RUT drops -5.1% in September leading the broad indexes lower. The chart prints an ominous 'three black crows' chart pattern which indicates sustained weakness ahead. Typically, you would like to see the candlestick bodies overlap but the three successive lows are good enough to call it a 'three black crows'.

Note how the elevated price above the moving averages in early 2014 and three months ago required a mean reversion lower. The red rising wedge is ominous since collapses out of rising wedges, a bearish chart pattern, can be quite dramatic. The move over the last three months is already dramatic. The red lines show the negative divergence on the indicators that told you the top was in place during late spring early summer. The RSI and stochastics are slipping under 50% which is bear territory. The ROC is positively diverged so the small caps are likely set up for a recovery in October but the other indicators are weak and bleak wanting to see further lows in price going 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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