Russell 2000 Signaling More Strength For Small Caps In 2015

David Busick

The small caps have slowly creeped higher since bottoming in October and are now bumping up against annual highs and threatening to breakout. The best way to follow the small caps is the Russell 2000 (RUT). I posted about the Russell 2000 in August and November, offering analysis and targets for this critical gauge of market risk.

For reference, my August article can be read here and the November article here.

Here are some highlights from those posts:

  • From March 2009 to May 2011, the Russell 2000 moved up 525.98 points or +153.5%
  • A target of 992.7
  • A longer term target of 1200
  • A longer term target of 1261.82 with support levels of 1111.28 and 1087.14
  • A close below 1087 would technically weaken the RUT
  • The RUT did indeed close below 1087
  • Although that did technically weaken the RUT, it never fell below the lower level of the uptrend channel
  • The RUT pulled back from a high of 1213.55 to a low of 1040.47; a correction of -14.26%
  • A new target Fibonacci target of 1205.92

Now here we are with only 3 trading sessions left in 2014, and it’s a great time to check in and see where the Russell 2000 is at now:

  • The Russell 2000 Index did indeed hit and close the two aforementioned targets of 992.7 and 1200.
  • The week of December 22nd saw the target of 1205.92 get hit and that target is now closed.

Now let’s take a look at where I think we’re going, which is higher.

In the 3 year, weekly chart below you’ll see a shorter term Fibonacci target of 1236.48 with support levels at 1175.76 and 1166.02.

Russell 2000 – 3 Year Weekly Chart

russell 2000 bull market trend chart 2011-2014

 

Although the 14.26 percent correction negated the longer term target of 1261.82, my thoughts are that the original long term target of 1261.82 will come back into play and be hit as well, as I believe the Russell 2000 will ultimately put in a “13” handle in 2015.

Always use a stop and have a good weekend!

Follow Dave on Twitter:  @TheFibDoctor

No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

 

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