The week the Russell 2000 finally saw the rise

It was a bargaining fork that your grandchildren had to talk about.

The thing went on for months and months, the kind of bottom-up, top-down action that drives even the best machine learning algorithms, let alone real humans. Finally, this week the Russell 2000 Small Cap Index blew up resistance and hit a new all-time high.

The buyers defeated the sellers who were consistently showing just above the 230 price level. All other things being equal (and they never really are), this group of small caps was allowed to go higher. If Russia invades Ukraine or China invades Taiwan, that can of course change the dynamics of risk.

For now, however, the question is how much higher? Will this index move towards a merger phase as we have seen recently in stocks like Tesla? This will have to be watched as other important sector indices have also burst higher this week. With the Shiller S&P 500 price / earnings ratio at 40, the markets are a bit heady right now.

They can always get more heady – this can possibly be a problem. Anyway, here are the tables.

IWM Daily Price Table it looks like this now:

The dashed red line that connects the March high to the June highs was resistance that seemed to hold small caps at bay. Once the index crossed that line and closed there, a large volume appeared as shown just below the price chart. The blue-line 50-day moving average flirted with the move below the red-line 200-day moving average, but has now returned to the upside. The multi-month consolidation is complete and the bullish breakout is clear.

Weekly Price Chart for the Russell 2000 Small Cap Index looks like this:

This is a classic aspect of a breakout above the previous resistance. In future price chart analysts books, readers will see this as an example. After the extraordinary rise from pandemic fears of March 2020, small caps stopped rising in March 2021 and simply continued to trade sideways mostly in a range. You can distinguish it between the red dotted lines indicating support and resistance this year. Note the sharp increase in volume (visible just below the price chart) and the positive moving average convergence / divergence signal (circled in red).

here is the Russell 2000 index point and number price chart:

Look at these 3 characteristics of this old-fashioned price analysis method: 1) The blue line trending upward from the pandemic lows of March / April 2020 remains in place and has not been tested at all since that low. 2) You can clearly see this year’s seemingly endless trading range between 208 and 232. 3) The breakout above the range is obvious even to a fundamental analyst.

Note at the top left, where Stockcharts.com provides a description of the chart in bright green as “P and F Pattern: Ascending Triple Top Breakout 01-Nov-2021”.

Correct.

No investment advice. For educational purposes only. Always consult a registered investment advisor before making any decisions.

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About Robert Valdivia

Robert Valdivia

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