Odds wise the deck is stacked against this from happening, but this is an odd market and anything can happen whether it makes sense or not. The chart below is a 2 year weekly chart and you will see that the RUT has never had a sustained rally with more then 5 white bars in a row.
The largest multi-week point gain prior to this current rally was 80 points with 2 huge weekly candles in Jan 08, this after a 150 point move down. Six weeks later it was testing those lows again and actually put in a lower low.
The RUT always seems to over-do it on the moves down and the moves up. Technically there is resistance at this 750 level, and technically it would also be plausible that any sustainable rally is going to need to retest past pricing areas. That would mean a pull back to at least the 720 area if not the 700 level itself.
A pull back is likely, but the timing and the point of "real" resistance will only be told over time. Should this week conclude with a topping tail on the weekly with the RUT closing the week below 735, then the chart could be setting up for a double top type of pattern at the 750 resistance.
If I were trading the RUT to the upside, I'd actually like to see a pull back to the 200MA on the weekly (about 720) to see if it could hold and bounce. This would be a more favorable entry for a long. Going long right now after 5 weekly bars heading straight up into resistance is not putting the probabilities in your favor.
RUT Weekly Chart:
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1 comment:
The Dollar Rally has ended and the Russell 2000 will be turning lower.
The Russell 2000 has has been up 12% since 7/13/2008 compared to 6% for the Nasdaq, and 4% for the S&P, and Dow as, it is comprised of small US companies highly influenced by the finanical sector which rose on July 14, 2008 as the yen carry traders sold oil and bought the banks.
The EUR/JPY has turned down, and just today the USD/JPY turned down.
Lacking liquidity from investing long via 0.5% interest loans from the Bank of Japan disivenstment will be coming out of all stocks globally.
The yen carry traders will be selling the financial sector to take profit and the Russell 2000 shares will fall rapidly.
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