I've been a vocal (probably obnoxiously vocal) doubter of the Russell 2000 for the last two weeks. I've also been very wrong! A longer-term perspective presents IWM
has "Pinocchio'd" above upward channel resistance - although it did not close above resistance today (Friday, July 12th) and put in a rather bearish
"hanging man" candle, this hasn't mattered to Mr. Market or Uncle Russ
. Relative Strength
is the market's equivalent of unconditional love, it trumps all. You'll notice my Elliot Wave
count isn't implying this rally is over, far from it actually. We're in the final days of establishing eWave 3, the longest and most powerful Elliot Wave
. Due to having poked through upper resistance, we're likely to attempt a tag of the parallel upper trend channel in the coming week - although I think we'll come just shy (I see 106 as the top).
The implied 25% decline from highs to around $79 (previous major resistance - now support) will come fast and without much warning. At this point I cannot foresee a catalyst that would cause such a severe sell off. However, honey badger don't give a @$#%. By approximating the angle of decent from eWave 1 to eWave 2 I'm assuming an upward turning-point and tag of the bottom trend-line support this coming September. Should support hold, I believe we will see a true "face-ripping" 11 month rally that will take IWM
to new highs near $120. This handle is significant for two reasons; confluence of trend line
intersection and also a 100% measured move of eWave 1 added to the estimated eWave 4 low -- the classic technical projection method of Elliot Wave
Good luck out there!