Russell 2000 Index: First targets breached

For a near term outlook, please read our update of 1 October below (still valid as of 11 Oct.).

The major weakness is part of a first down leg on the weekly chart. Support comes in around 1455 (lower part of the cloud) and 1445 (38.2% retracement). Setting a minor and intermediate base in this area is probable before the corrective phase continues. So even though a minor bounce and/or consolidation can be expected once reached, we strongly advise against any buying. Instead, cover some shorts (20% or so) and re-enter on rallies if they occur.

For the coming weeks and months we expect to see 1355 as a minimum. Once a bounce occurs new/ more accurate down side projections can be made.

  • Long term trend: neutral
  • Outlook: major correction in primary trend
  • Strategy: hold-short / sell rallies
  • Support: 1640 / 1455 / 1355*
  • Resistance: 1660
  • Major shift in sentiment: above 1660 (stoploss)

Weekly chart Russel 2000 Index (USA)

1 October 2018

The two key determinants for the Russel2000 Index are the strong bearish divergence of the past few months and the start of significant underperformance versus the S&P500 and other Large Cap indices. Risks for a deep correction are substantial. Although some cloud support is found at 1685, the current bearish dynamics in combination with the larger picture suggest that a major down move can be expected.

The first area the watch out for comes in around 1645<>1640. For the medium term however, we are positioning for a decline all the way to 1455 and perhaps lower depending on trend dynamics over the coming weeks. In any case, downside potential is major while risk is limited to 1715 (aggressive stops) or max 1745. We prefer the aggressive stop level; a major bounce is unlikely and unwelcome now that sellers are taking control.

  • Long term trend: positive (ends below 1640)
  • Outlook: major correction in primary trend, major reversal highly likely
  • Strategy: exit-long and/or trading short-entry
  • Support: 1685 / 1640 / 1455-
  • Resistance: 1715 / 1745
  • Major shift in sentiment: below 1640

Daily chart Russel 2000 Index (USA)

27 July 2018

Even though the long term uptrend remains in play, investors should be wary of a significant shift in sentiment.

For the coming weeks a correction back to 1638 and even 1610 can be expected. This correction is classified as a counter trend move within the aforementioned uptrend. Significant support is found around the 1615<>1610 zone. Here former pivots, retracements and cloud support coincide. This zone must hold out in order to keep the long-term trend valid.

Since indicators (longer term) are becoming increasingly wary, investors should be cautious in maintaining large long-exposure. A larger correction beyond 1610 is becoming increasingly likely. We suggest tightening stops or even partially closing longs and await developments on the near term. Again, below 1615<>1610 things turn very sour.

  • Near term trend: negative
  • Long term trend: positive
  • Outlook: correction in uptrend, possible reversal
  • Strategy: tighten stops and/or trading short
  • Support: 1638 / 1610 / 1580*
  • Resistance: 1710+
  • Outlook cancelled/neutralized below 1610

Weekly chart Russel 2000 Index (USA)