RUT Russell 2000 Small Caps Daily Chart Price Enters Correction Territory

The RUT small caps fall into correction territory down -10% off the top. A market correction is a -10% drop and a bear market is a -20% drop. The RUT placed an intraday all-time top at 1212.82 and all-time closing high top at 1208.65 on 3/4/14. Yesterday's LOD is 1082.53 and closing print at 1095.99. A -10% drop from 1213 is a 121-point drop which is 1092-ish. So correction territory is pierced but the bulls managed to hang on by a fingernail. Watch to see if price can drop under and maintain below 1092 to lock in the correction phase going forward. Small caps and tech typically lead the broad indexes (SPX (S&P 500) and INDU (Dow)) so traders are concerned.

The RUT is under the 200-day MA at 1116. Price pierced the lower standard deviation band so a move back up to the middle band, the 20-day MA at 1124, is a reasonable expectation moving forward. That move would send price back to the top rail of the downward-sloping blue channel as well for a test so a cluster of resistance forms at 1116-1124. The green lines show a falling wedge pattern and the indicators are lined up with positive divergence so price may seek a bottom in the near-term perhaps today. The possie d should create a recovery bounce to the 1116-1124 zone.

The pink box shows that a strong down trend is in place. The weekly chart is weak. As price has fallen the ADX is in the mid to upper 20's and higher indicating the strong trend in place for lower prices. Therefore, after a relief bounce, further weakness would be expected. The RSI never reached oversold territory so there is plenty of space to move on the downside. Projection is for price to base perhaps today or Monday, and recover, but for the weeks ahead the downward trend in price should continue as long as the ADX remains in the mid 20's and higher. Note that the 50-day MA is dropping and 200-day MA is flat so if you project that out to the right of the chart, a potential death cross would occur at the end of May or early June. Watch the slope of the 150-day MA (not shown) since its flattening and rolling over to the downside is a very ominous signal that says a cyclical bear is in store for the small caps moving 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.