Elliott Wave Analysis of the Russell 2000 Index by Sid from ElliottWavePredictions.com

Russell 2000 daily 1-12-13

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

The Russell 2000 index is showing several technical reasons why a top may be “in”, or quite near:

  1. The choppy, overlapping, corrective movement since the October 4 2011 low counts best in my opinion as a completed or very nearly complete WXYXZ.  This triple zigzag correction has run out of alphabet.
  2. There was a daily MACD histogram divergence at the close on January 8.  Now, three days later, the lagging MACD line appears to have rolled over at the top.
  3. The Thursday and Friday candles are clearly hanging man candles, indicating that an imminent reversal is likely.
  4. A strong reversal soon would confirm a bearish long-term “double top“, the first occuring in July 2007.
  5. Last week’s up-move finally managed to push wave B burgundy to at least 105% the length that wave A burgundy was, a requirement of wave B of an expanded flat.  A 5-wave downward impulse for wave C burgundy would be next, likely taking the Russell beneath its October 2011 low.
  6. Diminishing volume since the October 2011 low confims the 15-month corrective rise as a B wave.
  7. Bullish sentiment is at an extreme high, so very few bulls are left on the sidelines to jump in and drive prices higher.
  8. Last week’s near record in-flows into mutual funds represent extreme late-comers to an overly mature rally. These way-late momentum chasers are another sign of a top, and are likely to bail (sell) upon any movement into loss, propelling a larger move to the downside.

Can the Russell push to the upside a bit further?  Yes, but once a single blue ABC zigzag is complete up from the November 16 low, that should mark the end of the corrective rally that started on October 4 2011, and therefore burgundy B.  Blue wave C of that zigzag appears to be well underway, if not already finished.

I’m looking for several confirmations that the blue ABC zigzag is complete.  They are (in projected chronological order):  1) MACD divergence on a 180-minute chart;  2)  a clear, small-degree 5-wave impulse to the downside from the pink 5 high (on a 15-minute chart);  and 3) a break of the blue trend channel encompassing the candles up from the November 16 low.

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