Potential RUT Head and Shoulders

Just to further entertain the ultra-bearish argument, I want to present this RUT chart that resembles a long-term pattern that I highlighted as possible on the Dow more than a year ago.

020810_rut_daily  You can see that the 2007-2009 bear market brought the RUT all the way back to the 2002 lows, and the bounced to the downtrend line. The decline was in 5-waves, and the rally was a triple-three corrective advance. If we were to retest 350, and then break this level, the head-and-shoulders projection would imply a further 59% drop to the 137 level. I would project 225 as more reasonable.

However if we did get a drop to 350, I would imagine everyone would be pointing out this head-and-shoulders, so we may get a fake-break that then leads to the next decade of bull-market growth.


Dave Narby said...

"the next decade of bull-market growth"

...In 2035?

Seriously, now.

Unless the structural problems are fixed, this ain't gonna happen (unless the "reset" button gets pushed, in which case, the problems are indeed 'fixed').

Anonymous said...

RUT opening up 1%

Anonymous said...

Hey Naranya -- would love to hear follow up on RUT. Many thanks,

Narayana said...

This is a long-term projection. Even if it made marginal new highs, this pattern could still unfold. Best of luck!