Market Analysis

Chart in Focus: $RUT

Just sharing some technical observations here, found the $RUT of interest today namely because it is the one major index that seems to struggle with its 200MA. Remember small caps led in 2018 and then completely fell apart with the rest of the market in Q4. While other indices have moved above their 200MA (without a confirmed successful retest at this juncture), the $RUT is clearly struggling at the moment having rejected twice now in recent days:

Like the rest of the market the rally has been so one directional that a pullback could be sizable when it finally occurs. I’ve highlighted some fib levels that may be of interest. That is of course if $RUT has topped here for which we are currently lacking confirmation.

Indeed on the cash chart one could make the case for a potential bull flag perhaps into OPEX week next week:

Bit of a conflicting signal there as the $RUT’s underlying volatility index has broken out of its wedge. This breakout could possibly be retested and a new high on the $RUT could trigger a negative RSI divergence. So clearly a struggle at the 200MA, no clear reversal evident yet, perhaps a consolidation for new highs.

If a break lower does occur one can see an aggressive upward sloping 50MA which will cross-over its 100MA in the days to come. On any larger pullback these MA’s are likely to offer initial support in their vicinity.

On the weekly chart we see a broken upward trend patterns and an aggressive counter rally now in 2019. The earlier mentioned bull flag, (if it plays) would find resistance in the area of the early 2018 highs and the .786 fib, again likely producing a negative divergence in the process:

Like many of the larger index charts the rally remains untested and shows potential larger topping patterns, but with potential to move higher still before these patters would be invalidated.


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2 replies »

  1. RUT broke below key support @ 1550 today 3/6. It never did break above the 200DMA with any authority, so it now looks like it’s heading back to 1500. This should lead the other indices lower as the RUT often leads the way both up and down. So how long before the FED steps in with comments about stopping QT altogether and maybe even suggesting a rate cut later this month? Would not be surprised to see SPX at 2,700 soon and then some FED intervention to pump this baby up again. I will trade the short side for now but don’t expect things to get too far out of hand. Mr. Powell and company will make sure that there’s no crash, yet. Anyone agree, disagree?

    • Well, so far I was right about this. RUT hit 1510 on Friday and there are still two hours to go. Might still see 1500. The FED will be on 60 Minutes Sunday so of course a big dose of dovish talk is expected. Would not be surprised to see futures up big time Monday morning. However, if they don’t announce something concrete like a rate cut or the end of the balance sheet reduction, any pop should be short lived. As of now, the rally was rejected at SPX 2815-16, RUT 1600 or so. It will take a FED action or maybe a China trade deal announcement to push the SPX back above 2800 again. Short term, the market is getting oversold so a move up next week would not be a surprise. That’s my take, anyone care to comment, agree, disagree? Happy trading all!

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