About a week ago I talked about a possible Head & Shoulders pattern developing on the Nasdaq. While that pattern is somewhat in question, the Russell 2000 is now building its own. The last time it happened back in 2010 the Russell collapsed 27%.
But the technicals may be signaling a huge drop ahead, according to Richard Ross, global technical strategist at Auerbach Grayson. “I don’t like the small caps,” said Ross, a “Talking Numbers” contributor. “I’m a seller of the Russell 2000. In fact, full disclosure, I’m short the Russell in my personal account.”
The main question here is…… are the Dow & the S&P leading the market higher or are the Nasdaq & the Russell 2000 showing the early warning signs for what is to come in the overall market?
Over the last few months I have covered extensively why the stock market is approaching a top from both the fundamental/technical and the mathematical/timing fronts. It just might very well be that the more speculative indices will lead all markets lower. To start the bear market of 2014-2017. One thing is for sure, I would watch the Russell 2000 very carefully. If the Head & Shoulders develops as anticipates it would spell the impeding doom for the overall market.
