Saturday, April 23, 2016

RUT Russell 2000 Small Caps Daily Chart W Pattern Overbot Negative Divergence

There is big-time drama occurring with the small caps that will determine if the bull market rally has more legs, or not. Price moving above the 200-day MA at 1129 is a serious death nail in the bear's coffin. Each day that price remains above is another nail hammered into the coffin lid and there are five nails already. The bear's will not spring back to life unless the RUT falls back under the 200-day MA. The 50-week MA at 1151 is the next overhead resistance. The bear's last possible stand would be a the 1160-1165 area which is string price resistance. Above 1160 and the Russell is probably going to 1200.

100-wk MA 1166
Price Resistance Level 1160-1166
50-wk MA 1151
Now 1147
150-wk MA 1145
200-day MA 1129
150-day MA 1106

The W pattern was satisfied; remember, the W's are very powerful bullish patterns especially if they form under both the 50 and 200-day MA's. The W is 80 handles tall so the breakout from 1040-ish targets 1120-ish which was achieved. The red rising wedge, overbot stochastics and universal neggie d (red lines) now conspire to create a smack down probably to begin the new week.

The MACD line may poke higher, if so, that would extend the upside a couple more days. The RSI did not reach the overbot level either, which would remain on the table for the future requiring price to come back up after any pull back. The RSI weekly chart has long and strong indicators so higher highs are likely in the weekly time frame. Thus, a pull back should occur but in the weekly time frame, say sometime in May, there will likely be higher highs in the RUT perhaps testing the 1150-1165 area.

Price should show respect to the 200-day MA and come back for a back test and bounce or die decision so the 1129 is a logical target for a quick pull back. This move will tell a lot since price will either resume the uptrend or fail from the 1129-1130 level when it is tested. The 20-day MA is rising so in a day or three will likely be at the 200-day MA level at 1129 which provides an extra magnetic force for price to seek this level.

The ADX  (brown box) shows that the downtrend in price from late last year into this new year was very strong. The downtrend lost its mojo when the ADX fell lower as March began. That opened the door to at least sideways to sideways higher price movement. The surprising thing is that with this robust two-month rally the ADX remains low verifying that this obscene move higher in the stock market is not a strong uptrend.

The slope of the 150-day MA was highlighted in previous charts. It is an excellent indicator of the cyclical pattern of any stock or index; you can check the slope of the 150-day MA for all your positions to see if they are in cyclical bull or bear markets. The pink 150-day MA line is clearly sloping lower verifying that small caps are in a cyclical (weeks and months) bear market pattern. Upon close inspection, where a magnifying glass may come in handy, the 150-day MA slope is flattening--but not yet.

The SPX, INDU and COMPQ 150-day MA's have all recovered and are sloping higher indicating that the S&P 500, Dow Industrials and Nasdaq Composite are all in a cyclical bull market pattern again (by this metric). The Russell 2000 is the hold-out. Over the last two days, the 150-day is 1105.85 and today 1105.62. It continues sloping lower losing 23 cents. Watch this closely in the coming days because the 150-day MA sloping higher will be a huge nail in the bear's coffin. By definition, the 150-day MA will slope higher if price is above; thus, the bear's must jam the RUT under 1106 as fast as possible to make sure the stock market remains sick and selling off going forward

So there is quite a soap opera going on with the RUT for the week ahead. The 200-day MA at 1129 will continue telling the story. 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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