For anyone that held out hope that our little Russell 2000 might still have the strength to hold the uptrend... it's over! Last week we broke the uptrend that had held for over 4 years and now our charts are telling us that the probablilities are to move sideways to down in the intermediate time frame. The next support level we see on the RUT will be the 38.2% 730 level. Although a little bounce or a relief rally would be nice, the weekly candles, MACD and Stochastics still point to some lower price action in the near term. We may get some support at the 100MA Weekly at 750, but since it's seemed to bust through every other support level, don't be surprised if the fall continues to the 730 level. The RUT has now fallen 101.06 points (11.8%) on this down draft which has now surpassed the percentage drop we had in May 06 of 88 points (11.%).
The key thing to remember is that "It can go as low as it wants, sometimes support doesn't hold"
During this lengthy uptrend we've been able to enjoy, the support and resistant areas generally seem to work very well. However, in a market with high volatility and lots of fear these support levels seem to be forgotten sometimes.
Trade safe and be careful about counting on "support" to hold up as the weight of a broken long term trend as we've just had may crush those support levels. I don't want to sound too overly bearish as I really have no idea which way the market will go, but if we're just going off what the charts are telling us then we have to give up on the uptrend for now and keep a sideways to down bias on the RUT for now.
RUT Weekly Chart
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