RUT: Short-Term Perspective Cautiously Bullish, Medium & Long-Term Squarely Bearish
In my post on October 3, with the Russell 2000 (RUT) at 1671, I took the view that a swing top was in place in RUT, and that substantial downside was likely in the vicinity of the 2018 lows (1436-1482). The market promptly delivered, with RUT reaching this key support zone for the multi-month perspective. At this point, I would like to review RUT's current stance and provide my perspective gong forward.
Starting with the 1-week chart, RUT fulfilled the upside price target I set out for it in my post on February 11, 2016, reaching those targets in what can count as a completed impulse off 2016 low. It promptly followed through by a significant reversal, retracing most of the 2018 rally. IF it is able to follow through below 1436, it will confirm the base case perspective that the entire move off 2016 low topped. IF so, then I will expect vicinity of 2016 low (943) to be promptly revisited. Until then, however, potential for this wave to subdivide remains (Alt count). So, big picture, RUT tested its ultimate support zone for the swing bullish perspective.
Zooming in further to the RUT daily chart, a break below 1663, followed by follow-through below 1592, confirmed that the rally off the 2018 low completed, and RUT continued to promptly lose another 130 points. At this time, I view the immediate decline likely either complete or about to be complete. The ideal bearish scenario would be for a corrective bounce to the vicinity of 1615 area, to be followed by further downside continuation in wave C. A break over the 61.8% retrace of the preceding decline (1634, based on the downside reached so far) will be the absolute minimum indication that the bullish Alt scenario discussed in the paragraph above may be in play. Until then, while the short-term perspective is cautiously bullish (for a higher corrective bounce), medium-term and long-term perspective is squarely bearish.