Charts SYSTEMS

[JLS]

Gleno,

For RUT to go down to 1020 is what I call a major correction, yet it's barely over 10%. Possible? Sure. Probable? There is too much resistance between here and there and RUT's climb over the last several months has been very orderly, so a deeper correction would take a major news catalyst.

I don't see a major correction in RUT as being anywhere near possible in the near future. If you look at my previous posting of an SR chart at the link below, you will see very large support at 1075 then 1050. I think it is going to be very difficult to drop even below 1075, and yet that's a 6% correction off the highs. If you look at what RUT has done over the last year, its major corrections have often found support at previous major highs. RUT easily passed below the high that occurred in late October, but that high didn't exist long enough, and it wasn't down far enough from the all-time high, to be a major hurdle and it was tested once a couple weeks ago before being breached a few days later. One would sort of expect that, I think. So, put all of that together and I think that 1075 holds as being the worst case low for this correction. That aligns with what might not be unusual at the end of most very bullish years before a January rally. And would it not be expected that most funds would cause a sell-off at the end of the year as they take their profits and book a very good year, only to redistribute their funds in what they think are going to be the strongest sectors going forward and get back into the market as they set up for another good year for most economies? It's their job to invest their funds and make money. It's not their job to sit around and watch.

Look at all of RUT's large red candles at the bottoms of all of the corrections over the last several months. What do you see? I see that this correction probably ended three trading days ago and that each of the two days that followed had opening gaps going higher.

By the way, I like your multi-month wedge. Fits very well with what is actually happening. And as for your little triangle at the end, the last two sequential opening gaps on the daily hint that price is going to break through the top of that triangle. Any trader who wanted to go long should have gone long at the first opening gap after the large red candle down. That would have been Friday at the open. I would imagine that pattern traders would wait to go long after the breakout of the triangle. But on the next day of their trade, if things look a little slow then they will get a little afraid that an H&S top is forming. So fear will rule what they do next, not optimism, and I think that makes for a better market.

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