Sunday, January 10, 2016

RUT Russell 2000 Small Caps Weekly Chart Record Low Levels Back to 2013 Bear Market a Single Hair Away H&S

The RUT small caps dump -8% last week down to 1046 with a LOD at 1045. The Russell has been in a correction for many weeks down in excess of -10% off the June top and is now only one single hair away from a bear market. Keystone highlighted the rising wedge, overbot conditions and negative divergence (red lines) last summer calling the top which occurred to no surprise. The Russell 2000 topped out on 6/23/15 at 1296. Price is at October 2014 and September 2013 record lows. All investors that bought small caps from September 2013 to now, over two years of time, have lost money. A -20% bear market is 1038. Price is a whisker away at 1046 and lost the 200-week MA at 1056. The RUT is in a bear market; it is close enough for government work.

Price will likely spend several weeks staggering sideways like a New York drunk. The ADX is showing a strong downward trend for price in place, say above 20, but that trend lower in RUT will end when the ADX drops under 20. Note that the ADX confirms a strong upward trend into early 2014 but then it disappeared. That led to the small caps staggering sideways in 2014-2015 and then the ADX moved higher again confirming the strong downtrend in progress.

The chart can be considered a head and shoulders (H&S) pattern right now as shown by the purple lines, however, price may want to bounce and carry out some sideways action to build a longer term right shoulder more similar in symmetry to the long left shoulder between February and June. The 1050 neckline has failed, and considering the head at 1296, that is a 246 difference, so the downside target would be 804 if the 1050 level remains in failure. 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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