Pick any path you want, none look appealing from a bull's perspective.
I created this chart today because I found incomprehensible that the Russell tape kept getting bought aggressively into today's close. Forget about the fact that this index has tested the lows of this triangular range (black date range above) several times, but what is more troubling is that these are small-cap companies trading at what used to be Blue Chip prices, like a year ago.
Small caps should be respected for their bearishness; they are the first to get punched when the indices agree downward and they are also the hardest to get punched. This makes sense because smaller companies are less likely to maintain operations during times of economic hardship due to a number of logical cash-flow-related items. Thus, while it hasn't been made abundantly clear by the media or US politicians yet (Europe is less delusional) that the economy is doing not-so-great, I find it ridiculous that the only index to get aggresively bought during this intensely bearish afternoon session was the Russell 2k.
This is a testament to how little people fear markets these days, or rather, it is that they have only experienced this 2020 rally and do not care/were not alive during the year 2008. The type of fear that has been omnipresent since January 2021 is that of FOMO. Typically, when people are fearful of transient, bearish price action, the natural reaction is to panic-sell. Well, it's now clear that we have entered a new age where it is human nature to panic buy the riskiest assets when markets show bearishness.
I only kid, of course - there is no actual no new age of anything. In fact, I'd imagine that it'll only take the first near-term apolcalyptic selloff to reprogram the market masses.
All I ask is that you not be long the Russell at times where it makes more sense to be long just about anything unrelated to stocks.
Here's an EW Count that I just finished up. It is quite a complex pattern since March 2020, but figure I give it a go. This is unaudited, so keep that in mind:
Agree with you analysis and resistance level (2100). But you need to trust your resistance level a bit more. I think you are "too early" in responding to the level. The chart is sideways. We are in consolidation since March. The range is 2130 to 2350. Since the consolidation zone is very wide (200+ points), I would be tempted to trade the zone, rather than run in fear of it. The consolidation zone can go sideways for 7-10 touches. Best.
UnknownUnicorn5511258
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@tradeBob1, i dunno man, i think the bottom busts for alternation's sake (and because Id bet a lot of people are expecting the same thing you describe).
appreciate the perspective, it is certainly possible.
UnknownUnicorn5511258
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@tradeBob1, potentially 11 am head fake --> nasdaq bottom falls thru ---> other indices follow for 4%+ down today across the board.
tradeBob1
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I'm thinking we get an event sometime in July, August and September time frame currently. It will probably be adjustments in policy by the Federal Reserve (slowly I hope). Or they will start selling their balance sheet. Too much liquidity out there. Liquidity is going into the repo markets, and then it goes into the stock markets and bond markets from their. Hedge Funds take on way more risk than they can handle. I'm thinking a major Hedge Fund Margin Call. Like Long Term Capital Management and Solomon Brothers. I will get more cautious as we approach July - August - September. Best.
UnknownUnicorn5511258
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@tradeBob1, yeah russ is either faking out next leg up (only bases for this is how weakly it traded thursday and that it could be forming the last leg of an elliott pattern) or it is definitely going to pass the high on monday.
I think its a coin toss because of the non-confirmation from the Dow close (as it stands), but on the other hand, it is clearly showing it wants to go up. How much I can attribute this to meme stocks, I do not know, but I agree with you about the excess liquidity. Just not worth trading until it settles one way or the other.
I also think you could be right - I have a slightly different theory though: i think it'd only be appropriate for a more retail-oriented shop (robinhood, cough) that just implemented its options making business not so long ago to declare same-day insolvency (lol) which could very easily lead to mass exodus, application failure, digital bank runs, etc.
Then the hedge funds get called shortly thereafter. Otherwise, its a slow technical battle of momentum loss and breakeven moves.
DaddySawbucks
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Yeah I watched RTY climb while NQ fell, clearly rotating into it, warned about this on my chart post; when RUT goes off the rest follow, break soon IMO
UnknownUnicorn5511258
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@DaddySawbucks, for sure. when rut diverges in any direction from the other three, somethings gonna happen.
John_8-58
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If you want to be long stocks buy miners or S&P/TSX so at least you are long canadian dollars since USD is going down to hell. The apocalypse is not here yet (just a correction and rotation of smart money from tech stocks) we need to put millions in 5G and renewables before ;)
UnknownUnicorn5511258
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@John_8-58, hah, yeah youre probably right. Yet, it may still tumble apocalyptically. Time will tell