Russell 2000 Fibonacci Projection
If the Russell 2000 is in position to move immediately lower and if that move is impulsive (in the direction of trend), it’s not unreasonable to expect successive days of lower-lows and lower-highs.
In fact, our observation over tens of thousands of hours of price action has shown, as many as 13-days in a row can exhibit the lower-low, lower-high behavior.
Thirteen days leads us right up to the June 14th date referenced in our “Putting The Russell To The Test” update.
Note that Friday's action pivoted off the first Fibonacci projection level of 23.6. It's an important clue as the market is "respecting" the Fibonacci levels ... in effect, validating those projections.
If Tuesday, May 30th starts lower (and ultimately) into the projected level of 161.8, shown on the (inverse) chart of IWM, we’ll be looking at the precious metals to see how they respond.
That observation will be important as it may lead to the next opportunity.
Putting The Russell Reversal To The Test
Charts by StockCharts
We’re focusing on the Russell 2000 (IWM) for trade action as it’s farther along in its reversal than the S&P 500 or the Dow 30.
In keeping with our empirical observations on “Holiday Turns”, the S&P may have made its all time high this past Thursday.
As the (inverted) chart shows, the Russell looks as if it’s reversed as well.
Friday’s action may be viewed as a test of that reversal. Note how Friday’s red bar did not encroach into the body of the previous bar to any significant degree.
That lack of encroachment indicates bulls are weak. They are losing their grip and we may have a swift move ahead in the coming week(s).
Note the Fibonacci time sequence. There are 21 days between pivot points. Using that information and projecting forward, we may have an intermediate low at Fibonacci day 34, which is on, or around June 14th.
June 14th just so happens to be the day we have a Fed meeting announcement … how interesting.
Russell 2000, Nothing To See Here, Move Along
Charts by StockCharts
If we zoom in on the Russell 2000 (IWM), we can see the axis line that’s been in place for about six months … lulling everyone to sleep. Nothing to see here, move along.
Well, that's not exactly the truth. Reality is, price action attempted to break lower (inverted chart) in late April and failed to hold.
It then moved up, congested at the axis line for ten trading sessions before continuing on; breaking sharply higher.
Now, as the “buy the dip” meme has been played out in the press, price action has come back to test.
Note that volume (energy) is low. In addition, we’re in a holiday week. Such weeks have been empirically observed to be potential reversal points. This link documents our short list of such events.
At this point anything can happen.
Price is at a potential pivot. This is the location that Wyckoff identified in his “studies” text, as the point where the weight of a feather can push the market either way.
We’re at the danger point, where the risk is least.
5/19/17: Russell 2000 Reversal Continues
Charts by StockCharts
If we go by what the chart says and get away from all of the pundit (and money manager) opinion, we can discern the truth.
The Russell 2000 has been in a tight congestion period unlike any other in its trading history. Congestion equates to energy. A breakout from a long congestion period tends to be sustainable and dynamic.
In the case of IWM (Russell proxy), it looks like we’ll break to the up‑side on the inverted chart.
Volatility is still low and therefore, there’s still time (but probably not much) to position accordingly.
The typical financial advisory business does not trade the downside; the most profitable direction in the market. Fortunes are made on the downside. Jesse Livermore and Irving Weiss (the late father of Martin Weiss) are just two examples that come to mind.
5/13/17: Russell 2000 Reversal
Charts by StockCharts
The Russell 2000 (IWM as the proxy) appears to have completed its upward thrust and is near, at, or already in reversal.
We’re using an inverted chart of IWM as it’s just a little easier to see things in a bullish light.
On that (inverted) chart, we see that downward thrusts have exhausted themselves (note the MACD). We have been in a pivot for three weeks with higher highs and higher lows.
It’s still relatively quiet. This is the best time to take an inverse (short) position as the risk is low: Stop at last week’s IWM high, 139.48.
10/18/16: Russell 2000 Potential Spring Failure
Looking at the Russell 2000 (IWM, ETF) on a closing basis, we can see a Wyckoff ‘spring’ set-up.
When price action penetrates prior support and then does not accelerate significantly lower (as in this case), it sets up a spring condition.
This morning’s gap higher open in the IWM was a manifestation of that spring.
The problem is, springs are dynamic and move rapidly almost effortlessly higher. At times, there is a ‘test’ where price action comes back to the breakout level. However, such a test usually occurs several days after the initial upward move not in the middle of the launch off the lows.
That’s the problem with today’s action. It was weak. The breakout levels may not hold. Price action declined into the close.
If we get a penetration of the 120 level in IWM, we can conclude the next round lower is here.
Protected area has discussion and analysis on how soon we may expect a reversal (should one occur). Read more.
10/14/16: Russell 2000 Aligned To The Downside
Forces appear to be aligned to the down-side and especially for the Russell 2000 (IWM).
The Russell broke trend and then tested the underside. That test resulted in an immediate and decisive reversal. Price action closed just 0.03-pts, from the low of the day and appeared to be accelerating lower (in real time) near the close.
Today’s gap-higher open in both the S&P and the Russell had the opportunity to create a bullish bias. Instead, the chart shows the underside test (IWM) may be complete. Now, price action is aligned to the downside.
There’s a lot more to price action in IWM. Fibonacci time relationships appear to be in-effect. Those details and more are discussed in the protected area, located here.
The Russell 2000 Index (IWM, ETF) indicates a reversal.
The chart detail shows several independent (Fibonacci, Wyckoff, Classical) characteristics that lead to the conclusion that the index has reached a top.
This is the "danger point" where the risk (of positioning short) is at its lowest.