Stock Rally Nearing The End

Since anticipating a bottom on Dec. 25, we have seen a significant and vicious bear market rally - enough to scare many bears and draw some bulls back in. I'm seeing some setups now that this rally is near the end, so I'm selling longs and will be opening shorts into any further rallies this week.

Here we have the Russel2000 where a significant breakout midpoint at 1348.7 suggests a reversal zone of 1445.4, which we barely tested today. Further supporting this reversal zone is a smaller midpoint (split between two strong red candles) which proved it's validity since it foreshadowed a swing low at 1295.6. The 361.8% extension of this swing lines up nicely with the 1445.4 reversal zone.

Please see my recent GBPAUD analysis for another example of how I try to tie multiple midpoints together for higher-probability trades.

Comment:

Here is the larger midpoint setup with all other significant fib levels added. As secondary confirmation, note how well price action has respected these levels.

Comment:

There's a chance that the midpoint might be slightly higher, the split between the two strong green candles, which gives a higher reversal zone starting at 1445.4. I think this setup has lower odds of playing out though.

We would have to see steady price action and candle closes above 1460 to invalidate both the above setups and suggest the lows since late Dec. 18 may be more permanent.