Key Edge of Cliff Level to Watch in Russell 2000 June 7

Jun 7, 2010: 12:00 PM CST

As we start a new trading week, we see that the Russell 2000 Index, an index of small-cap stocks, balances on the edge of a chart cliff at the current level similar to the S&P 500’s 1,040 level.

Let’s see both the Daily then larger Weekly Timeframe chart and what levels we should be watching.

The easiest thing to watch is the rising 200 day simple moving average, currently perched at 632.  Price has yet to close under this level, despite two recent ‘tests’ of the average.

The S&P 500 has already closed under its rising 200 day average, so it would be a bearish turn-of-events if the small cap index follows suit.

The other level to watch is the 61.8% Fibonacci Retracement as drawn from the end-of-November swing low at 567.  That’s not a major Fibonacci grid (like one drawn off the March low), but it does align with the rising 200 period EMA.

The 61.8% Fibonacci retracement currently rests at 634, giving us a potential support confluence – thus level to watch – at 630.

If we see price close under this level, it would be a bearish turnabout that could carry the index down to test the February low at 585.

Now, let’s raise the perspective to the Weekly Frame:

What’s the obvious level that jumps off at you from the chart to watch?

That’s right – it’s where we are currently – the rising 50 week EMA at 624.

Do you see how different levels are aligning at the 630 level?  That’s why its critically important to watch what happens going forward – whether we bounce off confluence support… or slice on through it down to lower support levels.

Lower short-term support levels include the 575 level and, though I haven’t drawn it, the 38.2% Fibonacci retracement from the March lows to the April highs is 591 – slightly above the February low.

Other Fibonacci Retracement levels to watch include:

50.0%:   544
61.8%:  496.

Even if you don’t actively watch the Russell 2000 Index, it will be important to see what happens soon at these levels.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

5 Comments

5 Responses to “Key Edge of Cliff Level to Watch in Russell 2000 June 7”

  1. BalaB Says:

    Corey – Very cool~

  2. Joe_in_Indiana Says:

    Thanks for the broader outlook Corey.

    I trade TNA/TZA and this support area has me waiting for the move either way. Doing some short term trades with a short leash.

    Thanks again!

    Joe

  3. The Russell 2000 Falls Through A Broadening Top Pattern To Close At 61.92 « EconomicReview Journal Says:

    […] chart of the Russell 2000, $RUT, provided by Corey Rosenbloom, shows today’s activity before it fell to […]

  4. theyenguy Says:

    Corey, this is a very timely chart; it closed at $618.49. The Russell 2000 traded by IWM, fell through a broadening top pattern with apex at 62 going back to Dec 21, 2009 to close at 61.92.

    Today’s fall in the financially sensitive Russell 2000 shares, was induced by the fall of the financial sector, including RevenueShares Financial, RWW, and the regional banks, KBE.

    The key resistance having been broken; the Russell 2000 shares will now fall much, much lower, reflecting a fall into Kondratievv Winter. We have entered the last part of the economic cycle where eventually all fiat wealth will be established. I recommend that one be invested in gold coins.

  5. US Treasuries Rise As Markets Wait For Currency Traders To Move The EUR/JPY Higher Or Lower « EconomicReview Journal Says:

    […] he references his June 7, 2010 article Key Edge of Cliff Level to Watch in Russell 2000 June 7 when the Russell 2000, $RUT, traded at 631, that is on the edge of the $630 Abyss. Today the $RUT […]