Don’t Sweat the Small Stuff
No, I am not going to give you a review of the book. Instead, I want to do a quick multi-time frame review of the Russell 2000 using the tracking ETF $IWM and my RSI charts. Let’s start big with a look at the monthly chart.
Here you can see that from the inception in early 2000 this index formed a potential double bottom that has yet to breakout. Since April 2011 we have formed a symmetrical triangle that just below the breakout point. RSI is moving up in a bull range and CFG is pointing up as well. As we drop down to the weekly time frame this we see that the
Triangle on the monthly chart turns out to be a nicely formed Inverse Head and Shoulders pattern that is currently bumping up against the neckline. a break over which should complete the patterns on both time frames. Also note, the May slide found support right at the 2010 highs showing nice change of polarity. Here we also see the RSI is in a bull range. Drilling down to the daily chart you’ll notice the right shoulder of the weekly pattern is forming its own Inverse Head and Shoulders. Another nicely formed pattern that
might even be considered a fractal of the larger weekly pattern. Here again we have an RSI bull range pointing higher to work with. There is a case to be made this pattern has already broken out from the neckline and is now forming a small pennant before continuing higher. The RSI Positive Reversal pattern that fired on Friday supports this thesis so far. If it confirms by hitting its target, any doubts I have will diminish.
Things can change quickly in the markets, but this review says we could be on the verge of breakouts on all three time frames. Only time will tell if they fulfill these patterns, but I certainly would not be sweating the small stuff as $IWM looks to be about ready to take off.
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(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
