Update on RUT: Nov 20, 2014

We called a top for RUT on Jan 21 when it completed the Crab Pattern at 1174 and were rewarded with a juicy 8% return over the next couple of weeks.

Following the decline, RUT went up and tagged a larger Crab Pattern Fib — the red 2.24 at 1200 — on Mar 4.  It liked that price level so much, it tagged it again on Jul 1 after dropping 11% in between (actually, the second low was 19 cents lower, and the second high was 73 cents higher — so technically, a megaphone.)

2014-11-20 RUT  daily 1300The third attempt at a higher high in early September failed, and produced a mere 7% bounce.  But, the subsequent drop into mid Oct was a pretty impressive 12%.  Of course, thanks to Bullard, it was followed by a 13% rally.

But, the interesting chart development is that the latest rally is outside of the rising wedge that’s been forming since 2009.  In fact, it’s a back test of the broken wedge and the red channel, both.2014-11-20 RUT wkly CU 1300Now, backtests can and — in this rigged market — often do go on to exceed previous highs.  So, the current one could easily climb right on up the belly of the broken wedge to 1213 or higher.  It could also, as we’ve repeatedly seen with SPX, break right back into the channel as if nothing ever happened.2014-11-20 RUT wkly 1300But, for those watching small caps, it certainly bears watching — especially if USDJPY puts in a top of any importance in the 118-120 range.

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