The 30-minute chart of the ETF for the small caps housed in the Russell 2000 has been a recurring visual motif on my blog for a while now for good reason. Although it seemed and felt like the market was due for a sharp sell-off, the technical evidence since the New Year’s rally just has not been there.
The current rally is frustrating to many traders caught out of position, and the grind higher with an underlying sector rotation has added to the frustration of those missing the mark. Yesterday’s Bollinger Band squeeze that we noted obviously resolved higher. Bears will counter that this is a bull trap about to turn lower, but then again many of those same bears probably got caught short into today’s move, which sets up a potential max pain scenario of grinding higher yet.
At any rate, the price action in 2013 has thus far been defined by a rally, high and tight consolidation, and secondary push higher with underlying sector rotation. On its face, that action is bullish even as the S&P closes in on the 1500 level and devastating resistance from 2000 and 2007.
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