RUT has been loitering near the top of a large channel dating back to 1998 and a rising wedge dating back to 2008.  These patterns signaled a possible top.  But, there were some unresolved Harmonic Patterns at slightly higher prices.

Things got resolved on Friday.

continued for members…

RUT’s biggest reversal in its retracement of the 60% crash beginning in July 07 was at the .786 Fib — a clear signal of a Butterfly Pattern, which can reverse at either the 1.272 or 1.618 extension.

I was bugged by the timing, though.  I saw things coming to a head in May, not July 2013 or Feb 2014 as the chart patterns indicated:

The only issue I have with a run up to the 1.272 at 996 is the timing.  There are a couple of possibilities: at the intersection with the red TL (Feb 2014) or the yellow (Jul 2013.)

We were tracking a H&S Pattern that called for a return to the lower bound of the RW before rising up to tag the yellow 1.272 at 996.26.

But, the pattern and the big white channel busted with the gap up on May 3.  The red TL fell the following day.  And, on Friday, the yellow TL was officially broken.

It’s currently being back-tested.  But, if the back-test holds, there is no further resistance until that yellow 1.272 at 996.26.

Keep in mind that Butterfly Patterns can extend to the 1.272 or the 1.618 (or higher.)  So, there’s no guarantee we’ll see a big reversal at 996 (or, more likely at the psychologically important 1000 level.)

Note that the latest IH&S targets 1000 on the nose.

We have smaller pattern targets such as the white 1.618 at 1033 — which coincides with the small purple 2.618 at 1039 and red 2.618 at 1038.  And, of course, the yellow 1.618 itself up at 1174.06.

And, if the white channel is officially kaput, keep an eye on the yellow channel rising from the  2009 lows.  RUT just pushed up through the .25 line, and the midline is currently up around 1100.

It intersects the yellow 1.618 at 1174 around mid-August, so we’ll peg that as our secondary upside target for now.

If we get a reaction at 1000ish, it’ll be interesting to see how much of one it is.  The most bullish scenario would be a back-test of one of the broken patterns or TL’s.

If it broke back below the yellow TL, though, another appealing possibility would be the white 1.272 at 941.16 or the Fib retracements of the rally.

But, the first order of business is to hold the TL’s at around 971.

GLTA.