Thursday, April 11, 2013

Small Caps are telling the real story

At market turning points, the Russell 2000 tends to lead it's larger market brethren, the Dow and S&P 500. As of the close today, small caps have not confirmed the breakout to news highs by the the big boys. In fact, the Russell 2000 still hasn't surpassed it's high of 954 from a month ago. There is definitely resistance at these current levels.

I have referenced in prior posts how price can have repetitive behavior at coinciding tops and bottoms. This appears to be the situation now with the RVX, the Russell 2000 volatility index.

I really don't feel the need to point out every detail but if you look carefully the similarities are incredible.  Below is a 60 min chart of the RVX. The chart shows how I expect price to respond. This is a perfect opportunity for the bears.  The question is whether volatility moves higher quickly or does it re-test it's lows from last month?

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