Saturday, November 10, 2007

More Thoughts on the Russell 2000

First, reference the IWM chart below. Notice the Russell 2000 has been in an upswing for the last 4 years. However, on its latest up-swing it failed to rally to the upper trendline. Instead, it missed that line by a few points.

The chart above shows the possibility of the Russell 2000 forming a triangle consolidation pattern. Notice there are two possible lower trend lines. The upper line would indicate the Russel has already broken below key support. This analysis makes sense considering the Russell is already below its 4 year support line.

The second line is less certain. But it's important to remember that trend lines can move and multiple lines can exist. Therefore we have to consider it. However, I personally place less weight on this line largely because it is below the 4-year support line.