Awakening the Laggard

• Posted by Greg Harmon
• on November 3rd, 2015

Throughout the move higher in the markets in October the Russell 2000 has been lagging. In the previous 5 years of the market advance this index has been the leader. Is this a sign of rotation or did the Russell 2000 just take an extended nap and is trying to shake out the cobwebs be fore moving up? Signs in the chart are pointing to the latter.

The chart above of the Russell 2000 ETF ($IWM) shows the extended pullback and consolidation period. The August bottom was followed by a lower low in September. But since then constructive price action. Consolidation in an ascending triangle. Momentum rising into the bullish zone with the RSI pushing higher and the MACD positive and rising.

There are now 3 upside patterns that create a mosaic of positivity. The break out of the ascending triangle targets a move to 120.75, at the 200 day SMA. The Measured Move off of the September low to the consolidation repeated out of it looks to 122.70. And the bearish Shark harmonic has a Potential Reversal Zone (PRZ) at 126.70.

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