Russell 2000: Golden Dome of Death or Just a Speed Bump

• Posted by Greg Harmon
• on October 8th, 2014

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The Russell 2000 ($IWM) has done nothing all year. Well that is not completely fair. It did make a new high in a double top over 120, but it really has just moved sideways all year in a broad range. Starting October that range is being tested, to the down side. The price action looks to be a rounding top. What I will call the Golden Dome of Death. If it continues to roll lower there are a lot of areas of possible support. But if it stops falling in the short run this still may prove to be just a speed bump in the road higher.

The chart above shows the weekly price action for the last two years. What is prominent is that there are two consolidation zones, each lasting about 1 year, and a rising trend in between. The current position has retraced some of the move up but is still short of a 38.2% retracement of the full move higher. 38.2% is a key Fibonacci retracement level and comes at 103.90. A hold at or above this retracement would generally be seen as a sign of strength. A break below it would look for a deeper move to 50% or 61.8%. So what is it going to be? It certainly looks weak now but let the levels be your guide. Some speed bumps truly just slow you down and rattle you around.

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