Quite a reversal today with the Nasdaq 100 down 1.5% and the Russell 2000 (RUT – small caps) down almost 2%. Looking at the daily chart the RUT sliced through the 50/10 LRC and actually took out the volatility stop. The S&P, Dow, and Nasdaq stopped right above their Volatility stops but in my experience, the small caps lead the way and therefore the RUT may be telling us something. The Nasdaq needs to take out 2700 and the S&P needs to drop below 1495 before we really have something here. But back to the RUT, the last pullback was to 894.34 so that will be the first important benchmark to see broken. Many more after that including up trendlines 810ish, bolinger bands 890, and big support at 868.50. The Ergodic has crossed down and is giving a bearish divergence. The ADX turned, a magenta ball per Gail Mercer.
The weekly is also validating this possible warning sign. We have a upper bollinger band failure to penetrate, usually means exhaustion. We have a way overbought ADX at 65. And we have the ERgodic beginning to roll over. The week is not over and these are all just the beginnings so we need to see a lot more confirmation but I still think this is a warning of some significant down moves in the market ahead.
