Head and Shoulders Everywhere!

• Posted by Greg Harmon
• on July 18th, 2014

The Russell 2000 has been an enigma lately. Pulling back when the S&P 500 and Nasdaq were rising, then reversing. Seeming to move in a broad range between 1100 and 1200. It is frustrating both the bulls and bears. But a much longer view may give some needed perspective as to why this range is so sticky. The chart below shows 8 years of weekly price data for the Russell 2000. And what do you see on this broad timescale? 3 major Inverse Head and Shoulders patterns.

There is the very wide pattern in pink with a small left shoulder and bigger right shoulder that has a price objective to 1366 above still. But the other two may be holding back the Russell from getting there. The maroon one with a neckline at about 750 had a price objective to 1160, near the top of the recent range. And the shorter blue one with the neckline near 825 carried a price objective to at least 1110, near the bottom of the range. Two competing price objectives that may be burning some energy as traders move through their machinations. On this time scale the range looks a lot like a tight consolidation after a run higher. Nothing bearish there. Clearly the index is moving lower now, but until it breaks below 1082 it is just a consolidation range before the possible move higher to the 1366 price objective.

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