RUT: Magnet Fight 20MA vs. 200MA on the Hourly

Today I'd like to focus on the hourly chart of the RUT.

Finally, it's starting to get interesting again. I was so tired of the market moving in the same damn direction with no pull backs to get in.

The little 3 day rally is providing some more opportunities for us now. The price is now sandwiched between the rising 20MA and the falling 200MA -- they are both magnets, but we'll soon see which one is going to win, and it will be one of them.

Because the RUT hasn't had a significant pull back in the last 3 sessions I'm going with the bias that the 20MA will get tested first, BUT the RUT has an army of bulltards that can punch it up 30 to 50 points on any given day despite having any real reason to do so. That's why I'd still give it a 50/50.

The price barely closed over the 38.2 today after tapping it yesterday, so the next upside fib target is going to be the 50% 460 which it could easily hit in a day. There is a downtrend line on the hourly it will have to punch through as well to get to 460, so look for that area to be some strong resistance.

On the daily charts we had 5 days down and now 3 days up -- what will tomorrow bring?

The daily candle body was small today which may be starting to suggest that the rally is weakening.

If the RUT falls tomorrow I'd be looking for a downside target of 426 then 415.

If the RUT moves up, the topside targets are 450 then 460 -- above 460 I start salivating and scaling into some puts. (that is not a suggestion)

The 200MA hourly is will likely be the wall that encourages the RUT to turn around and continue it's downward path. It's what the price does and not what I think it will do that will dictate my trading actions, but with this volatility and the fast movement it's important to start my pre-planning for what I'm going to do if it goes up to point A or what you're going to do if it goes down to point B because it can get there really quick in our current conditions.

RUT Hourly Chart:



SPX Hourly Chart:

RUT Levels

The RUT rallied and came within .35 cents of the the 38.2 fib we targeted last week. This two day price action wiped out the nasty 2 days of selling last Wednesday and Thursday, but still leaves the RUT down in the basement.

On a longer term time frame the RUT could still technically retest the 2002-2003 lows in the 350 area so that is my personal low end target for the moment. Since the SPX and DOW bounced off their 2002/2003 lows it would make sense that the RUT can ride their coattails on a rally up, but from an economic standpoint it's the small caps that are likely to take the brunt of a depressed economy so I do believe the 350 could be retested if it gets nasty again. A break of the 405 level would open the gate for a possible 350 campaign.

As we mention time and time again, the RUT seems to constantly over do things to the upside and downside, so if it starts trending hang with it until the charts tell you it's over. Note the 6 day rally at the end of October and notice how the last two days of that rally had very small bodied candles near the resistance area. These candles were screaming that the move was losing steam and was itching for a pull back. I missed that observation and missed a great short opportunity, but I'll be watching much closer on this rally.

RUT Daily Chart:

SPX: 800 Support?

The SPX closed at a nice even 800 on Friday and has started to create a bottoming tail on the monthly charts at the 2002 lows. Technically this now becomes a very important area to hold. With 3 straight months down I'm now looking to see if it can move up to cross and hold 840 which would be a 33% retrace of the current monthly bar. Notice that the November monthly is larger then Sept and Oct bars. Historically this is indicative of exhaustion from sellers and can signal the start of a relieve rally once 33% of the November bar is retraced. This is likely area some will take a stab at some longs swing trades and a good area from their stop would be 750.

I can feel the desperation in the markets for any reason to rally as we saw on Friday afternoon with some political appointment announcements. This is at the same time Citi is still on it's deathbed along with the auto industry. I am still bearish the market, but there is likely some money to be made in the quick relieve rallies we're likely to see over the next few days and weeks.

I'll be keeping my eye on the VIX as well as the key resistance areas on the price charts. The moves up are likely to be just as tricky as the moves down where levels of support and resistance may work only 50% of the time. We certainly saw key support areas ignored on the way down, so I am preparing for the same thing on the way up. The market is best in emotional times like this at creating surprises.

SPX Monthly Chart:

RUT: Short Term Upside Target

With the RUT creating "another" bottoming tail after an extended move down on the daily charts, the probabilities for short term bounce are present. The short term upside target is 440 where the 8MA and 38.2 fib intersect. The upside target above that be 460 and then 490. There should be some resistance in the 470 area at the downward trendline. The 20MA is currently running parallel to the downward trendline.

RUT Daily Chart:

RUT: What if we Bounce?

Below is an hourly chart showing the first 2 fib targets should the RUT start a bounce tomorrow. The first target is 423 and the second is 447.

RUT Hourly Chart:

NDX Levels

While the DOW and S&P500 have now found some monthly support, the RUT and NDX still have a ways to fall before retesting 2002 support levels.

NDX Monthly Chart:



Of the four major sectors that make up the NDX, it's the relative strength of the Biotech Sector that seems to be keeping the NDX afloat. Here's a rundown of the sectors.

Semicondutor Index:
The semiconductor index is trading at all time lows and this has dragged on the Nasdaq.





Internet Sector:
The interet sector has fallen, but could fall much further to reach 2002 lows. A weak economy could continue to hurt this sector.



Software Sector:
The software sector has also fallen and could also fall further to reach 2002 lows.



Biotech:
The biotech sector has some relative strength here, but if weakness should continue in this sector it could be the last bit of momentum needed for the NDX to retest the 2002 lows.

DOW 7500

The DOW came within 6 points of tapping the 7500 level which "should" be a good area of support. The market is VERY oversold, but it has been oversold for months and yet it continues to move lower.

Technically this should be a good monthly support area, but with the current panic in the market I wouldn't be surprised if we still traded lower for a while before this area supports on the monthly chart. Notice the tails on the 1997 and 2002 candles that fell below 7500 before supporting.

DOW Monthly Chart:

RUT Levels

The RUT fell another 27 points today to close at 385.31. The RUT is now just 35 points away from the 350 support area.

The market movement is certainly showing panic and the trend continues to be straight down. The RUT now seems to have it's target on the 350 area as there is little support prior to that area. Should it break below 350 before supporting then 310 is the next likely support area.

RUT Monthly Chart:

SPX Hits Downside 775 Target

What's next? Now that the S&P 500 is at some long term support we'll have to watch and see if it can hold. A bounce would make sense here, but with all the other support levels being ignored on the way down we need to see some evidence of a bottom AND the follow through before we can comfortably say that the downward move has stalled. Notice that I said "stalled." We are in a bearish market and at these levels we are likely to be way under the downtrending 200MA on the daily charts which is illustrating our trend. There will certainly be short term rallies to resistance, but in all likely hood these levels we're at today will again be retested in the coming weeks and months.

SPX Monthly Chart: 775 target reached today



SPX Monthly Chart: Showing Next Support Area of 675

RUT Downside Target Below

My new downside target for the RUT is 350. Should be easy considering we were at 490 on Monday. The momentum is still strong to the downside.

RUT Monthly Chart:

SPX Target in Sight

I had to pull out to a 10 Year Monthly Chart to illustrate the support area at 775 for the S&P 500. This is the first target. Momentum and trend is still to the downside.

SPX Monthly Chart:

Internet Sector Index Head & Shoulders Complete

The Head and Shoulders pattern we've been tracking on the Internet Sector Index was completed today as seen on the chart below.

Internet Sector Index Weekly Chart:

DOW Target

The DOW Monthly Charts are indicating a close downside target of 7500. There is horizontal price support in that area from 1997, 1998, 2002 and 2003.

DOW Monthly Chart:

NDX Monthly Chart

The Nasdaq 100 continues to get smacked and is now resting on the backside of an old monthly downtrend line. The next major support on the Monthly Chart is the 2002 bottom at the 800 level. Looking at the monthly chart, the current red bar is still solid, indicating that the move still has momentum to move lower.

NDX Monthly Chart:

VIX Levels

The Volatility Index for the S&P500 closed at 69.15 today which is still holding the 8MA on the Weekly Chart. This confirms that there are still very high levels of uncertainty in the markets.

VIX Volatility Index 5 Year Weekly Chart:

RVX Still Creeping Up

The Russell 2000 Volatility Index is still creeping up, hinting that there is still some room for the RUT to falling.

The RVX closed today at 75.44 which is a 2 week high.

RVX Daily Chart:

SPX Downside Target

Looking at the monthly chart it seems likely that the momentum will now take the broad market index down to the 800 and 775 levels of 2002 and 2003. With today's close at 850.75, unless the bulls show up tomorrow this could be a one day shot down to 800 for starters.

SPX Monthly Chart:

RUT: The Good News

Looking at the RUT monthly chart there appears to be some horizontal price support in the 350 area. If the RUT closes below the recent lows of 440 it could easily drop down to retest the 2003 lows in the 350 area. The market is showing us that it has little interest in stabilizing.

RUT 20 Year Monthly Chart:

Monday RVX / RUT Numbers

The RUT pulled back today, and in doing so the RVX shot up to retest the downward trendline in the 65 area. It is still holding the downtrend, but at the same time the RUT actually "broke" it's up trend on the daily charts -- MIX SIGNALS, really need to see how the next few days play out to see where we go.

With price being king, the Bears have the edge with that trend break today. Not much support on the daily chart should the RUT break below 490 tomorrow. Could easily retest those lows again quickly.

RVX Daily Chart:




RUT Daily Chart:

RVX Levels

The RVX chart is starting to look very interesting. The uptrend was finally broken and the retest of the "back" of the upward trendline rejected the RVX sending it lower to close at 59.73 on Friday. This created a bearish engulfing pattern on the RVX so the current bias is bearish on this volatility index.

Based on this pattern a target of 45 by month end is entirely possible. Once it cracks below 55, there is not much support to catch it before it hits the 45 area.

Key area to watch first is the 55 level.

RVX Daily Chart:

RUT Monthly

The November range thus far has straddled the fence on the long term monthly uptrend on the 20 year chart.

Keep your eye on where it closes at month end as it is likely to hint at the next short term leg up or down.

RUT Monthly Chart:

Friday TF (RUT Futures) Intraday Chart

Oct. 31, 2008 TF 5Minute Chart:

Note the power of the 20MA on this 5 minute chart.