Monitoring Long Term Resistance in the Russell

Mar 20, 2012: 10:57 AM CST

While the NASDAQ recently crested above both its 2011 and 2007 (before the recession) high, the Russell 2000 – an index mainly of small-cap stocks – struggles to overcome its key long-term resistance level.

Let’s build the charts and view the key level to watch – for both long-term and short-term planning – in the Russell 2000 Index, starting with the Monthly Chart:

One might call the period from 2003 to present as a long-term Sideways trend, or range-style index.

The alternate interpretation – especially from an intermediate term standpoint – is to refer to 2003 to 2007 as a bull/up-trend, 2008 to 2009 as a bear/down-trend, and the current move from 2009 to present as a continuing bull/up-trend that’s taken the index back to the 850 to 860 overhead resistance barrier.

However you define the trend structure, two index areas should jump off the chart at you:

  • The 850 to 870 High (856 in 2007; 868 in 2011)
  • The 750 Level (Polarity – mainly resistance from 2008 to present)

With that in mind, let’s now drop to the Weekly Chart:

Price formed a multi-month Distribution Top from February to July 2011 ahead of the “August Crash” which ended at the 600 index level.

From there, price has resumed its longer-term uptrend, though not as strong as the Dow, S&P 500, or the NASDAQ – all of which have traded above their respective 2011 highs.

Nevertheless, the intermediate trend remains structurally bullish due to the series of higher highs and higher lows along with positively-sloped EMAs.

Short-term traders may do best to plan contingencies – and thus trades – based on the current picture in the Daily Chart:

We use the higher frames to show us key levels (either to use in targeting or in finding resistance/support) and the lower frames often give opportunities to trade within those levels (moving toward, or away from, a key index target).

For now, that short-term upper resistance level clearly exists near 835 to 840 while a broader support area has developed at 760.

The flat/falling 200d SMA also aligns near the 760 index level which was resistance through late 2011.

Quite simply, we’ll be watching for one of two developments:

  • The Bullish Case is that the index breaks above 840 and travels towards the 850 or even 860 higher timeframe targets.
  • The Bearish Case is that the index can’t break resistance, stalls, and begins trading lower towards the 760 support target.

In the meantime, we’ll assess real-time developments within this context (index levels).

Corey Rosenbloom, CMT
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2 Responses to “Monitoring Long Term Resistance in the Russell”

  1. futures trading Says:

    Looks like if the Russell 2000 Index starts consolidating at current price levels, we might have good support there and would go higher.

  2. T2C Trading Says:

    Interesting to see over the last week that the Russell is consolidating in a channel but the S&P 500 has not.  Will be watching this week to see if the Russell can break out of the channel.