• 10 hours From Frenzy To Flop, The Death Of This Year’s Most Hyped IPO
  • 15 hours Are Smart TVs Spying On Us?
  • 17 hours Is Fossil Fuel Divestment A Waste Of Time?
  • 1 day A Russian Billionaire’s Space Quest To Save Humanity
  • 2 days Markets Take Breather As Consolidation Continues
  • 2 days Economic Woes Weigh On Copper Prices
  • 2 days World's Largest IPO At Risk Following Drone Strikes
  • 2 days Gold Is Beating Buffett’s Berkshire Hathaway
  • 3 days What’s Behind The Silver Sell-Off?
  • 3 days The Retail Apocalypse Is Accelerating
  • 3 days The Top Tech Stocks Of The Year
  • 3 days America’s Workforce Elderly Workforce To Double By 2028
  • 4 days Toyota Tests Solar-Powered Prius
  • 4 days Why The Gold Rally Flatlined
  • 5 days The Uranium Sector Can’t Catch A Break
  • 5 days Upcoming Fed Meeting Has Investors On Edge
  • 6 days Global Gold Sector Outlines Responsible Mining Principles
  • 6 days China’s Giant Vampire Fund Loses $120B
  • 7 days McDonalds To Roll Out Robot Drive-Thru Clerks
  • 7 days Savvy Investors Are Betting Big On This Little Data Company
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Are Small Caps Topping?

Small cap stocks, as represented by the Russell 2000, have had a nice run up. However, there is compelling pattern evidence this weekend that suggests they are topping and a significant decline is fast approaching. We have three charts that suggest this forecast.

First, we show a chart that compares price movement with a plotting of its 10-day average Advance/Decline Line Indicator. When prices rise for an extended period of time, and while that is occurring, the A/D indicator is declining, this is a Bearish divergence, telling us fewer and fewer stocks are participating in the advance, warning a top is approaching and a reversal lower is around the corner.

RUT 10-Day Advance/Decline Line versus Russell 2000

Next we show a mapping chart with Elliott Wave notations, that shows the Russell 2000 is completing an Expanding Ascending Wedge, which is a topping pattern. This is a large degree pattern, has been ongoing for two decades, and is now coming to an end. This is a Weekly Chart and it shows the Full Stochastics are overbought.

Russell 2000 Weekly Chart

Interestingly, at the tail end of this large degree pattern is another pattern that is a topping pattern of smaller degree, a Megaphone pattern, that looks complete, or very nearly so. The next chart gives us a close up view of this pattern.

The troublesome aspect of this chart is that it gives an approximate downside price target, which is the bottom declining boundary line, in this case around 700. This suggests it is possible a 50 percent decline in small caps is possible. That is hard to believe, but this is typically a reliable pattern. Now crashes are rare, so we won't be betting the farm on this pattern, but it sure is cause for caution at this time.

 


Get a FREE 30 Day Trial Subscription to receive our Daily and Weekend U.S. and International Market Forecast Reports at www.technicalindicatorindex.com Simply click on the button at the upper right of the home page. We cover stock markets and Gold daily and have Buy / Sell signals. We also offer a Platinum Trading service. Email us at mainrdmch@aol.com for information on that program.

When did Noah build the ark? Before it rained. Well, it is starting to rain. We believe it is now time to make sure our arks are built and can float. We can help you at www.technicalindicatorindex.com with our daily and weekend market updates, or conservative portfolio model, and Platinum educational Trading program.

Do not be satisfied hearing what the market did; learn how to predict what the market is going to do. Join us at www.technicalindicatorindex.com as we study the language of the markets. Markets tell where they are headed. Technical Analysis is the science where we learn and apply the forecasting language of the markets.

Dr. McHugh's book, "The Coming Economic Ice Age, Five Steps to Survive and Prosper," is available at amazon.com at http://tinyurl.com/lypv47v

"Jesus said to them, "I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day."

John 6: 35, 38, 40

 

Back to homepage

Leave a comment

Leave a comment