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:
- 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.
- 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.
- The Thursday and Friday candles are clearly hanging man candles, indicating that an imminent reversal is likely.
- A strong reversal soon would confirm a bearish long-term “double top“, the first occuring in July 2007.
- 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.
- Diminishing volume since the October 2011 low confims the 15-month corrective rise as a B wave.
- Bullish sentiment is at an extreme high, so very few bulls are left on the sidelines to jump in and drive prices higher.
- 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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Sid
