The Russell 2000 (RUT) was the biggest head fake of them all, as it closed out of the ascending wedge on Thursday, only to crater back to the lower end of the band. A lot of bulls were cheering the small cap rally, but traders with experience knew that this was not the one to chase during recessions when funds can get risk averse. Trendline support will be at 735 on Monday, bulls need to hold it or we will see a long overdue test of the 50 dma which has moved up to 722. My overall take on small caps is bearish, I think we will see 690/695 pretty soon. But first things first, watch for that break of the wedge and then the 50 dma. If bulls do manage to hold 735, another run to the top of the wedge is possible, but it would only be a postponement of the pain to come. The 750 level is going to be pretty strong resistance going forward. If you are short from Thursday, stops need to be lowered to just above 750. This is a market that punishes those that are not quick, so stay awake and pay attention to those charts.
This entry was posted
on Saturday, June 07, 2008 at 6/07/2008 12:28:00 PM.
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