It’s Deja Vous All Over Again

After stocks fell hard in August and September, the Russell 2000 and $IWM rallied strongly in October. Since the February low, we have seen a similar rally especially when you review the retracement levels currently in place. This is uncanny.

A favorite tool of ours is the Fibonacci retracment levels for each period. In a retracement you draw a line from the peak to trough and then observe the retracement levels.

So from the June peak to September low, the Russell 2000 rallied to above of its 50% retracement and below the 61.80% retracement by late November. Then the selling began again.

Now the Russell 2000 has had a similar rally to below its 61.80% retracement from the December high to February low. In fact, the Russell 2000 almost hit this level and missed it by one point.

So a break below the 50% retracement at 1073.49 would give us a hint that trouble is brewing and the next corrective phase is on the horizon. If we can move above 1104.27 on the Russell 2000 then I will get more bullish. For now, a hedge position in the Russell 2000 makes complete sense.

Morning Matters Archi