Oct 31, 2009 – Russel Corrective Triangles and Predictive Powers
Posted by pugsma on October 31, 2009
Here’s another good at the Russel-2000 small cap index. This index contains many of the more volatile small to mid-camp stocks. But it’s also is a much more broad indicator of market direction than the SP-500. If you look at the period from mid-May through early July you can see the Russel mapped out a 5 wave (a-b-c-d-e) corrective triangle. This correction began in mid-May, well before the SP-500 started to correct in mid-June. So basically the Russel signaled the up coming weakness in the SP-500.
Now look at the late-Sept area on the Russel-2000. Again the Russel signals weakness starting around Sept 23rd well ahead of the SP-500 that peaked at 1101 on Oct 21st. The Russel is again mapping put an a-b-c of the corrective triangle as the SP-500 is making it first a-leg of an a-b-c corrective. So as the the SP-500 completes is b-c, the Russel should comple it’s d-e.
So I’m watching the Russel as the leading indicator for the SP-500 index. It seems to be leading by about 1-month in time. Assuming the Russel follows through with the d-e legs of it’s triangle the SP-500 should complete it’s b-c of it’s corrective late in November. However, if we see the Russel completely break down, then it would be time to become more bearish on the SP-500 future.
Finally, I want to thank “Mark” from the Good Vibes CIL Traders Lounge for tipping me off on using the Russel as a leading indicator. Mark has been mapping the Russel-2000 moves from some 20+ years.
Sorry, the comment form is closed at this time.