The following is just a small excerpt from my latest Weekly Strategy Session (please click on that hyperlink for details about trying it out) which I published for members and 12631 subscribers this past Sunday.
The Russell 2000 Index, featuring high beta, small market capitalization issues with tons of institutional sponsorship by growth managers, has been our main key to this market for quite some time now. The small caps’ persistent weakness has largely seen us maintain a rather defensive portfolio posture as swing traders amid their technical deterioration.
Last week, the Russell momentarily breached 1,082, our major downside support level and indeed “neckline” which would trigger a confirmed multi-quarter topping pattern, before staging an upside reversal on Thursday afternoon and Friday. Against that backdrop, the Russell and indeed broad market can easily bounce higher yet in the early portion of this coming week of trading.
However, a short-term bounce does not negate the technical damage we have witnessed in the Russell and indeed other parts of the market. In the next subsection of this strategy session, I will zoom out and look at the major indices to keep that broad perspective.
But, for now, traders should be on guard for a bounce in the Russell potentially up to the 1,130-1,140 area, which would mark the 20 and 50-day moving average convergence.
At that point, traders can stalk fresh short entries in the Russell, provided that we see signs of the rally failing. Of course, if the bounce immediately fizzles out early next week and small caps attack 1,082 again, the presumption is that we will see a violent breach of support which will, in fact, trigger the multi-quarter top.
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Let’s see if we can get the violent downside. Grandma today and bond prices kinda make me worried it wont happen.
Hey chess the Russel kind of looks like 5/2007 and 10/2007 to me