Market Direction and Stock Trends

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Russell 2000 Index (RUT) - Further Decline Likely »» Monthly Summary Analysis
By: Marty Armstrong | October 12, 2019

ANALYSIS AS OF THE CLOSE Fri. Oct. 11, 2019: Russel 2000 Index Cash closed today at 151190 and is trading up about 12% for the year from last year's closing of 134856. Up to this moment in time, this market has been rising for this month going into October reflecting that this has been only still a bullish reactionary trend. As we stand right now, this market has made a new low breaking beneath the previous month's low reaching thus far 146222 yet it is trading below last month's close of 152337.


Currently, the market remains bullish on the momentum indicator yet neutral on the short-term trend indicator while the long-term trend and cyclical strength are bearish.

The historical major high took place here in 2018 and we have up to now this year remained trading within last year's range in a consolidating pattern. So far we have seen a trading range of 161837 for a high and 132518 for the low. This market on the yearly level has been making new highs since the last low established 6 years ago which has been a series of successive advances. The last 2 highs have been progressively making higher highs implying we have had a bullish market in motion for the past 11 years. The last high was made during 2018. We did elect two Bullish Reversals which confirms this has been an impressive reaction for now on this level.

Meanwhile, our technical resistance stands at 189759 and it will require a closing above this level to signal a breakout of the upside is unfolding. Nevertheless, our technical support lies at 181825 which the market is now trading beneath illustrating technical weakness. Last year we did see an outside reversal to the downside, which is a warning that we have at least a pause in trend at this moment. If we penetrate that low of 126692 and close below it this session, then we can see further downside ahead in price movement. Otherwise, holding that low intraday allows for a pause and consolidation briefly.

Our timing models warn that a turning point is due come November in Russel 2000 Index Cash so we should remain focused. The last cyclical event was a low established back during August. Normally, this implies that the next turning point should be a reaction high. However, the market has been neutral for right now, so caution is advisable and look more closely at the short-term trading levels for a hint of the next directional move into that target time frame. Last month produced a high at 159050 but closed on the weak side and so far, we have broken beneath last month's low 146747 closing yesterday at 151190. We now need to close beneath 146747 on a monthly basis to imply a technical reversal of trend to the downside for now.

Some caution is necessary since the last high 161837 was important given we did obtain two sell signals from that event established during May. That high was still lower than the previous high established at 174209 back during August 2018. Of course, that was the major high in this market, which means we have a downtrend for the past 13 months. Nevertheless, we have elected two short-term Monthly sell signals to date on this monthly time level from that major high so there is still important underlying support which needs to be broken to change the trend on this time horizon. Critical support still underlies this market at 135100 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible. For now on a broader perspective, this market in an uptrend posture looking at the monthly level. We see here the trend has been moving up for the past 9 months. The previous low of 126692 made during December 2018 on the Monthly level has held and only a break of 145032 on a closing basis would warn of a technical near-term change in trend. The previous high made during May on the Monthly level at 161837 remains significant technically and only exceeding that level on a closing basis would suggest a reversal in the immediate trend. We have generated a buy signal so some caution is required.

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