RUT and 770 Resistance Area

The RUT rallied with the rest of the market on Tuesday and Wednesday, but found resistance on Thursday at 770. On Friday the RUT gapped all the way up to 780, but spent the rest of the day fading and ended up closing below the 770 area at 767.77

Although the RUT has technically broke the recent downtrend (red dotted line) on the daily chart, the 45 point move from 735 to 780 seems "extreme" and maybe more of a relief bounce then a reversal.

Friday's price action created a topping tail candle at the 770 resistance level and provides a clue that new buyers have not yet materializes above 770. Should the RUT continue to fall on Monday there should be support levels at 762.50, 757.50 and 751.50

A possible key to the RUT's direction may be in the Homebuilder's index. The weakness in this sector over the past few months have helped to drag the RUT down, but the Homebuilders may be trying to hammer out a bottom near 5 yr lows. If the homebuilders can get a similar relief bounce up, it could easily pull the RUT up and over the 770 area. If the homebuilders continue to weaken the RUT will likely have trouble as well.

RUT Daily Chart:



Homebuilder's Index ($HGX) 5 Year / Weekly:



Homebuilder's Index ($HGX) 1 Year / Daily: