RUT: How it Got Here, Where it’s Going

About a month ago, as part of the series of charts inspired by our latest analog [see: Analog Details Feb 7, 2018] I hazarded a forecast for RUT that called for a rebound to the rising white channel (which had recently broken down) by Feb 14, a retracement on Mar 1, and a subsequent rally back into the rising white channel. The only serious uncertainty at the time was whether ES’ tag of its SMA200 was sufficient — or whether SPX would need to follow suit.

In any case, SPX did go on to tag its own SMA200 the following day, meaning RUT posted a slightly lower low before rebounding.  It reached the white channel on Feb 14 as expected, but continued leaking higher for several days before putting in a low as scheduled on Mar 1.Since then, it has nonchalantly rejoined the rising white channel as though nothing was ever wrong.  It has done this many times in the past, of course.  So, that’s not terribly noteworthy.

What is interesting is that the Feb 9 plunge facilitated an important backtest that should help determine whether it has further upside ahead.  What’s fascinating is the extent to which nearly every one of RUT’s twists and turns has been driven by algos.

The precision of these moves leaves little doubt that they’re by design.  No random walk, here.

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