Elliott Wave Analysis of the Russell 2000 Index by Sid from ElliottWavePredictions.com. Click on the chart twice to enlarge.

Here is a daily chart of the Russell 2000 index, showing that yesterday’s session broke and closed below two major trend lines, one connecting the extremes of wave 2 & 4 blue, and the other connecting 2 & 4 pink. This, combined with an impulsive 1-2-1-2 internal count down from the 868.57 high on shorter time frame charts is strongly suggesting that a change of trend has occurred. Additionally, the same weekly candle that made the May 2 high, closed as a bearish engulfing candle.

Look at how beautifully the MACD highs, highlighted by the pink vertical lines, are verifying the wave 3’s, and therefore the viability of this count. Also, the MACD provided multiple divergence warnings on the daily chart as wave 5 black matured. Finally, waves 1 and 5 blue ended very close to being equal in length, a Fibonacci relationship, and a common Elliott Wave expectation.

If this count is correct, we’ve just seen a trend change at cycle degree, which means that, (I’m having trouble saying this), the all time high of 868.57 on May 2, 2011 should stand for years, and the Russell is just two weeks into a bear market that will take it eventually below it’s October 1998 low of 303.87, a drop of over 65%.

The alternate is that we’re still involved in a wave 4 (blue), and there’s one more upward push to new highs left in the tank after completion of either an expanded flat or a running triangle. Make no mistake . . these alternate counts are still viable! However, the break of the trend lines, along with all of the other evidence presented above serves to reduce their likelihood to some degree, in my opinion.

Sid
http://elliottwavepre.wpengine.com