In our last update on RUT [see: Dec 8 2016 Update on RUT], we noted that RUT had almost reached a potentially important turning point.

If it follows the same general pattern as SPX (as guided by our analog), it’s getting fairly close to its next turning point at 1392.

As it turned out, RUT tagged 1392 the very next day and reversed as expected.  But, those licking their chops over a great shorting opportunity were disappointed.  After six long weeks of chop, it managed a miserly 3.6% decline.

Three weeks later, we’re right back to 1392 — begging the question: what’s next?

continued for members…

The decline was gentle, but vicious in the amount of chop it produced.  We saw several 1%+ declines reverse by the end of the day — particularly the Jan 30 one which saw the rising white channel temporarily break down.  Sign of the times…

Friday, TPTB decided they had had enough.  RUT broke out of the falling white channel, but couldn’t quite make it above the previous high.  Today took care of that, too.  But, curiously, it closed back below 1392.

Head fake, or a sign of weakness?  The next few days are very important, as RUT has an opportunity to break above the yellow channel that dates back over 20 years.  It can be seen below in the daily chart…

…and, even better on the weekly.

Interestingly, the white channel in which it’s currently rising crosses the yellow neckline and the former high at 1296 in late March/early April.  This is the same timeframe during which RUT might have backtested the purple channel it backtested following the election, and also the white .618 at 866 had it not broken out of the purple channel (the two white dots.)

In other words, the narrative was changed post-election — just like SPX and DJIA.  At this point, the support is way up at 1330 (the big, white channel top) and, after that, at 1296.

If it can break 1400, it will leave the rising yellow channel in the rear view and won’t face overhead resistance until the purple 2.24 at 1493 and the 1.618 at 1514.09.  The latest IH&S targets 1444, which is in the middle of nowhere (as an aside, the previous IH&S — which broke down last July, targeted current prices.)

I’m not a fan of Elliott Wave, but it sure appears to be working on a 5th wave at present — maybe even a 5th of a 5th, who knows?  But, if it’s a 3rd wave, as some suspect, the breakout above 1400 should be all it needs to really launch it.

This is a critical week for markets all around, with Janet Yellen testimony tomorrow and a whole slew of potentially important economic data to digest — not to mention an increasingly volatile geopolitical environment.

Stay tuned.