Continued Strength in the Small Cap Russell 2000
- Posted by Greg Harmon
- on April 28th, 2016
Tax day started it. It was then I noted that there were Sharks Circling the Russell 2000 chart. The pattern developing at that time looked to give the Russell 2000 a lift. Last week the story got even better and I pointed out 5 Positive things in the Russell 2000 chart.
The small cap index continued higher. By the end of last week it had reached the Potential Reversal Zone (PRZ) of that Shark pattern at 113. With the pause there it looked like maybe that was it for now. Another lower high after a strong rally. And that still might be the case. The markets were disappointed by the Bank of Japan decision to take no action. The Japanese market lost over 3%. In the US the the S&P 500 has dropped back all the way to Monday levels. Not so bad. And the small caps? They look set to open near the Tuesday consolidation area at 114 on the Russell 2000 ETF ($IWM).
The small caps are continuing to show strength. And with that is separation from that PRZ on the Shark pattern. This would mark a failed reversal for other harmonic patterns, but the Shark comes with 2 PRZ’s. The second one stands above at about 118. And with the continued strength in the RSI and MACD, it looks like a run to that second PRZ is in order. If that occurs it would make for a higher high, above the December range and place the Russell firmly back in the consolidation levels of last fall. Like January and February did not happen.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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