Martin Pring's Market Roundup: Have You Ever Watched The Same Top Movie Twice?

The Russell 2000 Sequel - Articles - StockCharts.com

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Martin Pring's Market Roundup

Have You Ever Watched The Same Top Movie Twice? The
Russell 2000 Sequel
January 08, 2015 at 02:14 AM | written by Greg Schnell

Russell Duplicates 2007 Topping Structure

Nasdaq 100 did not confirm the new highs
Timing over the next few weeks is critical
In the next five charts, there are a lot of similarities between the Russell 2000 ($RUT) 2007 top structure and the Russell 2000
($RUT) 2015 current top structure. If these patterns continue to stay in sync, we should see a major breakdown over the next few
weeks.
Chart 1 shows the current Russell 2000 ($RUT) Weekly. Recently there has been a lot of talk about the Russell 2000 stocks starting
to outperform the $SPX. The area shown in purple shows the purple down trend and the recent break above the downtrend.
However, it never really started any upward move above previous highs. A break to the upside on this purple chart here would be
important. The orange line is the support trend line. The 40 WMA has gone horizontal. However, the breach below the orange line and
the 40 WMA was a potential signal for the final rally. After spending more than a month below the 40 WMA and the orange trend line,
it made one last stab at the highs. However, even when the run up happened, it could not sustain the break back inside the trend. The
market ran up for 2 weeks to test the highs. The test failed to hold above the highs and broke down. This 40 WMA really needs to hold
and the price has to break out to new highs. Lastly the MACD dipped below zero and then a bounce back up that looks like it is
rolling over. Notice that the most recent test of the highs took place after the price action also broke below the topping structure at
1075 to mark the first lower low. The test of the previous double top was a very quick failure. That seems ominous.

Chart 1

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Lets look at the Russell 2000 ($RUT) 2007 topping structure.

"Recently there has been a lot of talk about the Russell 2000 stocks starting to outperform the $SPX. The area shown in purple shows
the purple down trend and the recent break above the downtrend. However, it never really started any upward move above previous
highs. A break to the upside on this purple chart here would be important. The orange line is the support trend line. The 40 WMA has
gone horizontal. However, the breach below the orange line and the 40 WMA was a potential signal for the final rally. After spending
more than a month below the 40 WMA and the orange trend line, it made one last stab at the highs. However, even when the run up
happened, it could not sustain the break back inside the trend. The market ran up for 2 weeks to test the highs. The test failed to hold
above the highs and broke down. This 40 WMA really needs to hold and the price has to break out to new highs. Lastly the MACD
dipped below zero and then a bounce back up that looks like it is rolling over. Notice that the most recent test of the highs took place
after the price action also broke below the topping structure at 760 to mark the first lower low. The test of the previous double top
was a very quick failure. That seems ominous."

Chart 2
So for Chart 2 I just duplicated the comments made for Chart 1 and have shown it in quotes. The only change in the entire paragraph
is the price level 760.
Chart 3 shows how the top completed in 2007 on the weekly.

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Chart 3
Here is the daily version of the current chart of the Russell 2000 ($RUT) for 2015. On this chart we made a 2 day new high. Notice
the number of times on the chart that the highs land on the first of the month. I have placed the fibonacci levels on the recent rally
with today's bounce starting the retracement.

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Chart 4
Chart 5 is the 2007 version of the Russell 2000 ($RUT) on the daily. On Chart 5, Notice the KST has a much steeper run up than
this current year's final bounce shown in Chart 4. I would suggest we are somewhere in the orange circle area in time. In 2007 it
bounced up to 61.8% of the low in the circle before rolling over.

Chart 5
So this looks very suspicious to me. While each individual thrust on the daily is not the same, from a weekly view there are a lot of
similarities. I think the paragraph on the weeklies defines how similar the conditions are very, very well. The intention is to point out
the tight rope the markets are walking right now.
On Chart 6. the Nasdaq 100 ($NDX) which has been a clear leader, also missed making a new high with the rest of the market
indexes. This is significant because usually the Nasdaq has the leading stocks. By not confirming the recent $SPX highs, this is an
important development.

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Chart 6
I will be discussing these charts in the webinar Thursday, January 8th, 2015 at 4:30 PM EST. Please click through here to register. Thank
you for taking the time to join me if you can. Of course all webinars are now available on our webinar archives facility.
The timing over the next few weeks will probably provide some answers. I think it is important to be aware of just how close we might
be to a major top.
Good trading,
Greg Schnell, CMT

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