RUT: Light Volume Bulls Get It

The RUT moved up again today on light volume to give it a confirmed higher high on the daily charts, just like it did last December before everything fell apart.

The charts look great and bullish, but lets see what happens when some volume comes into the market next week.

Happy New Year!

RUT Daily Chart:

RUT: Bulltard Afternoon

There's nothing like bad consumer confidence numbers to spark a rally and today was no different. The market shrugged off the dismal numbers, held 50% of the morning move and then took off like a rocket in the last hour to close at 482.77. This was on very light holiday volume.

I mention the light volume, because it was the light volume rally the day after Christmas last year that created the top at 800 right before the January collapse.
Rallies on low volume are suspect, so be careful.

Technically the price is holding above the 20MA and a strong green bar materialized closing above the weeks consolidation, so the charts are looking bullish. We'll have to wait and see if it can follow through.

RUT Daily Chart:

RUT: Once a Trend Line is Broken...

The RUT put in a down-day to close 1 point above the 20MA on the daily chart.

The 8MA and the 20MA are just starting to rollover, so watch to see if there is follow through tomorrow.

At at glance the 20MA is moving sideways which gives me no guidance on direction. Lets break it down:

Bullish:
- Higher high on the daily charts
- Price is still above the 20MA

Bearish:
- Broke the uptrend line on the daily chart and has now spent 6 sessions below it.
- Starting to form a mini head and shoulders pattern on the daily
- 50MA and 200MA still pointing down

Keep in mind that the current geopolitical issues could move the markets very quickly in the coming days and weeks as oil prices get pushed around.

RUT Daily Chart:

RUT: Tiring

The RUT closed lower today, but is still holding the 20MA on the daily chart. This still has to been seen as mildly bullish since the higher highs and higher lows are still intact.

Yesterday I did point out that this is the third leg of the relief rally, and in the intermediate downtrend we find ourselves in, three may be all we get. A normal rally would be three to five legs so with the negative sentiment it will likely be three to five. We'll have to see.

Just from a pure visual glance at the charts I see the path of least resistance being 440 on the daily charts. Even if the RUT is going to move up higher it makes more sense to me that it will need to produce a bigger pull back in order to get some strength.

At present, 460 is the area that needs to hold to keep the bullish bias intact as that's the area of Monday's lows.

RUT Daily Chart:

RUT: More Mixed Signals

The RUT continues to put in higher highs and higher lows on the daily charts AND it successfully retested and bounce hard off the 20MA today creating a bottoming tail. In a bullish market this would be great and I'd be pretty bullish, but there are bearish factors that take some of the stream out of this move...

1) Short term uptrend was broken and price is still below it
2) Today's bar closed below Friday's lows (Friday was a topping tail candle)
3) Resisting at 490
4) Today's selling down to 460 showed that there are sellers out there
5) This relief bounce has had 3 legs up so far and may be weakening
5) We are still in an intermediate bear market and path of least resistance is now down

With all that said my bias still cautiously bullish with today's close, but I also see 440 as a likely target if it falls apart tomorrow.

RUT Daily Chart:

Tonight's Conference Call Canceled

Sorry for the late notice, but tonight's call is canceled due to a conflict with our granddaughters Christmas Play.

Our next conference call will be January 8th, 2009.

The charts at the time of this post are looking awfully bullish. Higher highs and higher lows continue on the daily chart.

RUT: Up Again

The FED's promise of FREE money got the RUT moving to the upside again.

Today's close at yesterday's upside 480 target helped to prop the price back over the green uptrend line again. This also kept the "higher low" intact. Today's close at 482.85 also guarantees a higher high (only by 1 point), but it is a higher high technically.

Tomorrow will be key to see if there is follow through. This may be the excuse they needed to go on a Santa Rally buying spree.

There is overhead resistance at 550 and 580. For the time being I expect the price to chop between the upward trend line and 550. A close below the trendline again will force me to reassess.

Tomorrows Uber Upside target: 512
Needs to hold (close above) at least 466 to keep bullish short term tone.

Be prepared for anything tomorrow. In many cases a bullish reaction to the Fed has crumbled to new lows just a few days after. There is no evidence of this yet, so we trade in the direction that the chart shows us, but we are prepared to switch direction at a moments notice if that's what the chart tells us.

I am still trading intraday only and am not ready to take any swing trades "Long" at this time. It's likely that I will use my patience and wait for the price to reach a strong resistance area like 550 or 580. At those points I would look for a reversal signal to enter some "Short" swing positions. I fell more comfortable trading in the direction of the intermediate trend in this type of volatility.

RUT Daily Chart:

RUT: Weekly Chart > 8 TRAIN

One way to make boatloads of money while trading is to take the Train.

The best train to take is the 8 Train.

What is the 8 Train?

The 8 Train is when the price trends aggressively up or down, but NEVER breaks the 8 period moving average. Get in, and don't get out until the 8MA is broken.

Looking at the RUT weekly chart you can see that the 8 train is still chugging along to the downside. Note the rejection it got today as it tested the 8MA.

Something to think about, it works on all time frames.

RUT Weekly Chart:

RUT: Weakness

The RUT closed lower today and here's what we have on the daily charts:

For the bull arguement:
- Tested and stayed above the 20MA
- Still above the neckline of the reverse head and shoulders

For the bear argument:
- Closed below the short term UP trend line. (green line on chart)
- Closed more then half way down Friday's bullish daily candle

There are two arguments in favor of the bulls AND bears so we have a draw. This brings me to a neutral bias and we'll just have to see if the FOMC meeting tomorrow can tilt it one way or the other.

The 20MA is running sideways which is difficult to trade since it is likly to move across it for a while if we continue to consolidate here. I am still keeping my trades to an intraday basis only as there is no firm direction on the daily charts yet. I will wait to see the 20MA trending before I take any directional trades longer then a day.

Fib wise, it favors the bears since it broke below the 50% area again, so that's one more argument for the bears... we see how tomorrow unfolds. The TF fought hard this afternoon to get back over 450, that will be a key area to hold on the TF tomorrow.

Agressive targets for tomorrow:
Upside: 480
Downside: 430

The more I look at this chart, the weaker it looks to me. Notice that it has been unable to put together more than a one or two day rally for the last 11 sessions. This put together with the second break of that trendline in 3 days is starting to raise the warning flags for me. It will take the bulltards to come in with blinders on to buy aimlessly in order to pump this thing up at this point. It very well may happen, so I'll be ready to jump on that train for as long it's rising. The reverse head and shoulders is still in play for me as long as the price stays above the dotted red line of the downward trend. I have often seen prices test and bounce hard off that line.


RUT Daily Chart:

RUT: Holding the 20MA

The RUT put in a very bullish day Friday after retesting the 20MA on the daily chart and the 440 support area. On the bullish side, it also closed up about 70% of the previous day's red bar. A close higher then 55% of the red bar would be seen as bullish.

With the current market volatility I'm taking a day by day approach to my bias and for today I am short term bullish since we held the 20MA and it created a higher low and a higher high on the daily charts. We'll see what happens on Monday.

RUT Daily Chart:

RUT: Lots of Action, What's Up for Tomorrow?

(Levels mentioned are for TF Russell 2000 E-mini Futures intraday price action)
Today was a great day on the RUT (TF) as it traded very methodically and predictably between well known support and resistance levels of 464 and 474 before it cracked 464 and fell apart all the way down to 450.

Yesterday I posted that 474 was still a very important level to clear and the RUT tested it twice creating a double top pattern on the 5 minute charts. Just before 12:00, it broke 464 support and for the rest of the day it was the smack down to 450 which was the next plausible support level.

In the context of the daily chart, this was just a minor pull back to the 20MA. If the bulls show up tomorrow it should bounce here at the 20MA and if it is to remain bullish, it must close above 464 which would be a 55% retrace of today's red bar. If it closes below 464 tomorrow I give the control back to the bears.

What was really bearish about today's close, was that it closed below the green uptrend line AND the dotted green neckline of the reverse head and shoulders pattern. Broken trendlines in my experience are some of the greatest subtle indicators available to us.

With that trend break, I would not be surprised if the move continued down tomorrow and retested the backside of the daily downtrend line in the 430 area. If it does, it may be a good area of support that give the RUT some more footing for another leg up. If it supports at 430 it would create a higher low on the daily charts and still keep this short term rally alive. With Monday's close at 480, the RUT daily chart did create a higher high. The next few days will show us if we have a higher low or if we head down to retest the resent lows.

In summary, it will go up or down, but at least you have some targets on both sides to shot for.

RUT Daily Chart:

RUT: Still Holding the Neckline

The RUT held the neckline again today, and with a rally in the last half hour was able to close above the important 474 level after getting beaten down after lunch to 469.

The daily chart is looking bullish, we'll see how tomorrow goes. That 474 will again be the key area to support tomorrow. If we fall, watch 465 as important support, if that breaks, it could easily go retest 450.

RUT Daily Chart:

RUT: Pullback

The RUT had an extremely bullish morning session moving straight up to the 490 area where it tapped the R1 pivot. It continued to fall hard the rest of the day where it closed near it's lows at 465. This close was also near yesterday's lows.

As I mentioned in yesterday's post, 474 was an important level to hold. Today's price action created an ugly topping tail candle at the old November resistance levels near 490. The RUT may now be in a position to pull back a bit more to retest the neckline of our reverse head and shoulders. If it tests and holds it's starts looking very bullish for the short term.

The 8MA and 20MA on the daily chart are starting to level out and go sideways which may invite some whippy action above and below those MA levels. The chart shows how the 450 support level near the 20MA may be the first downside target tomorrow if the day turns out to be bearish follow through. If the RUT moves up, it will first need to clear that 474 area again.

RUT Daily Chart:

RUT: Reverse Head and Shoulders Confirmed

When the futures opened up Sunday night, the action grinded higher through the night to 476 before pulling back a bit prior to this mornings open.

The day had a few pops to the upside and closed near the highs at 481.38 which is 1.04 away from the 61.8% fib we talked about last Friday. This was today's target.

After 2 days of straight up action, we'll have to see if the uber bullishness continues tomorrow in the AM session or if it's going to need a pull back to muster the energy to go higher.

The neckline on the reverse head and shoulders has now been breached, so our 4 week target to the upside is set at 580. There will likely be some ugly pull backs along the way, but at this point if it holds 450 I'll remain short term bullish.

The price has now been above the 20MA for 2 days and the 8MA has crossed up over the 20MA which is the first time it's done that since early November -- Bullish.

Now that I've seen the reverse head and shoulders set up AND it's confirmed, my bias is much different then it was 2 days ago. Two days ago the price action was screaming bearish as it stayed below the down trending 20MA. Now that it's broken the 20MA and the downtrend line on the daily the momentum has shifted. Only the price will tell us how long this is going to last. For tomorrow I'd like to see it close above 50% of today's candle to keep me interested which would be 474ish. Interesting, there was a late day pull back to 474 that retraced very quickly back up to the 481 area.

RUT Daily Chart:

RUT: Intraday Reversal

Despite the gloomy unemployment numbers the market found support and rallied hard starting at 7:45 (Pacific). From 9:00 on, the price never broke the 5m 20MA - a very strong rally.

In 5 hours that price action took the daily chart from a classic resistance at the downtrend line to a chart that now is confirming a higher low and may attempt Monday to put in a higher high. The price will need to close above 473.14 in order to put in this higher high. If it can do that, the next fib target on the upside would be 482.14. I mention that fib level as a target since the price seems to be latching on to those levels. On Friday the RUT closed just .05 from the 50% fib of 461.14 (461.09 was the close).

News wise, the economy is in the worst shape since the depression and most would argree that it's going to get much worse before it gets better. The important thing to remember is that the market doesn't care. The market will continue to trade technically because price is based on human behavior.

There is a reverse head and shoulders pattern (bullish) forming on the broad markets and if the neckline is broke this is a very high probability pattern to trade, despite it's going against the intermediate trend and going against the fact that the economy is in terrible condition. We'll continue to watch this pattern form.

Earlier this year the DOW Transports Sector Index formed a similar reverse head and shoulders pattern and it played out perfectly despite a slowing economy and rising oil prices -- those were external factors that logically went against any sort of rally, but the price moved up anyway. Remember that the market doesn't have to be logical, just watch what the price is doing. Eventually common sense prevails in pricing but usually after making some crazy gyrations.

RUT Daily Chart: Reverse Head and Shoulders Pattern forming

SPX: The Trend

The SPX daily chart illustrates a great example of a trend working.

While everyone and their brother is trying to pick a bottom, the price action just continues to follow the down trend. Sometimes it's just better not to fight it, but to flow with the river... and this river is flowing down.

SPX Daily Chart:

RUT: Another 20MA Smack Down

The RUT got bullish ballistic at the open and tried to open the the 460 door again three times but got sent packing each time. The afternoon session sold off hard and the RUT closed down 14.23 points to close at 440.20

It will get another chance to retest 450 to see if it can clear it.

My bias is neutral to down with the 20MA rejecting todays price action. Note that the price is now below both the 8MA and 20MA on the daily now.

RUT Daily Chart:



RVX Daily Chart:
The RVX action today created a doji on the daily chart giving us little hint for tomorrows probable direction. The RVX continues to hold above the 8MA and 20MA so it's still a hint bearish.

RVX: Reality Check

The Russell 2000 Volatility Index ($RVX) continues to show that there is still a good amount of fear lurking in this index. Unlike the VIX which has broken below it's daily 20MA, the RVX at 71.85 is still above the 20MA on the daily.

For the last three and half weeks the RVX has been stuck in a range between 87.50 and 62.50. With last Monday's sell off it hit 77.50 for the day.

More than anything else, this range is reminding us that we are still at historically high volatility levels and large moves up and down should be expected. This will likely mean more chop on the daily charts.

Many continue to say that we are forming a bottom which is the same rhetoric they've been repeating erroneously for the last 4 months and have been wrong every time.

Rather then predicting bottoms or tops we may be better served by tightening our trading time frames and therefore having better control over our trade entries and exits. There is a reason the RVX is at 71.85, and that is because there is a high probability of large price fluctuations - Monday was a grim reminder of what high RVX is all about.

We continue to be in an intermediate downtrend and despite intermittent rallies we need to remember that the greater river is running downstream right now. That doesn't necessarily mean to be short right now, but if you look on the daily RUT charts it's clear that the RED candles are the biggest and most prevalent.

Reminder: Before this September the RVX ALL TIME High was a spike to 44.43, Last week we had a solid bodied candle with a range 65 to 77 - don't get to comfortable yet...

RVX Daily Chart:



RVX Weekly Chart: Still above 8MA (bearish)

RUT Daily Chart: Head Above Downtrend

The RUT closed at 453.76 with enough candle body to poke it's head above the downtrend line on the daily chart. In theory this is bullish, but it also smacked the downtrending 20MA earlier in the day that created quick a smack down during lunch.

At this point we have an uptrending 8MA and a downtrending 20MA with the price trapped between the two, WAY above at 660 we have the downtrending 200MA. Technically the 200MA is an upside target, we'll just have to see how difficult of a task it is for the RUT price to rally in the current economic environment. It's very important to remember that price action never has to make sense, but we must trade the price action and not what we think will or should happen.

The RUT has only spent 3 days above the 20MA since October, and that was just before the huge leg down in November. This may or may not be the place were prices rally under the guise of a "Santa Claus" rally and everybody "buys in" because they feel everyone else is doing it. If this happens and prices can trend up to the 550 level it should create a good short set up in that area.

I continue to keep a bearish bias overall, but I am currently bullish short term on the daily charts. Right now, the 440 level will need to hold in order for me to remain bullish.

RUT Hourly: Heading Toward Congestion

The RUT had a little relief bounce that you can see on the hourly chart. The price at 441 now is heading up into some technical congestion with the downtrending 20MA, the downtrend line on the daily chart and the horizontal price resistance in the 450 area.

The upward trendline on the hourly held very well in the afternoon session today, we'll see how it holds up tomorrow or if it even gets tested. The hourly put in a higher low and closed at the last minute with a higher high so there is a slight bullish bias based on this chart.

Because of the congestion, tomorrow may be another choppy day.

Wednesday Targets on Hourly Chart:
Upside: 20MA at 445.88 and 450 where downward trendline intersects horizontal resistance.

If the RUT should breakout strong tomorrow and clear 450 it may have a clear shot back up to last Friday's 470 high at which point it will hit the downtrending 200MA and likely resist.

RUT Hourly Chart:

RVX: Heading Back to the Highs

The RVX closed up 12.72% at 77.81 and is stalking the 88.13 high.

Today's action seems to suggest that the fear is NOT leaving the market as some had hoped last week.

RVX Daily Chart:

RUT: The Mighty 20MA

Last week we talked about the potential of the RUT moving up to the 460 area and finding some possible resistance where the downtrend line on the daily intersected with the downtrending 20MA.

Today, the smack-down happened at the open with the RUT losing 460 right out of the gate. From that point, the price never even broke the 8MA on the 15min charts -- very strong move down.

There were several points that could have held, like 450 and 430, but it seems there was some panic selling again causing the RUT to fall an amazing 56.07 points today.

With today's 11.85% slide, it will be interesting to see what happens tomorrow. Next support on the hourly chart is in the 405 range.

RUT Daily Chart: Resistance at 20MA