Russell 2000 Daily Chart Bull Trap Review

 

RJY00-Aug-3-2016

 

When we look at this Russell 2000 cash chart, we can see that on June, 22, 2015 was its highest peak, before the markets crashed to another major bottom on about February, 11, 2016. From “B” to “C” is a very clean great looking zigzag.  I’m looking at the entire structure as a possible triangle in progress, and if this is true, then we can already look at the forecasting properties of this pattern. First, the “B, C” zigzag should get completely retraced sometime in the future, no matter how deep these markets will eventually go.  

Even this counter rally has not retraced the entire “B, C” wave, so this still needs to happen, it just may not do it this trip. If another inverted zigzag has already topped, then it too will still need to get completely retraced.  To do this the Russell 2000, still has to confirm that this rally is a fake. Bear market rallies virtually always get retraced, and the 2016 rally fits the bill right now.

I have to stress a very important EWP fact and that is, that many, many  times, the real physical top, is not the real degree wave top.  This fools the early bears all the time, as they think that the bull market has ended in 2015, when in fact we could just be in a bull market correction, called a triangle. I would call it a sort of extended triangle, because one wave travelled to new highs, while the others didn’t.  Of course, this would all be a setup for a great reversal, where the markets can then soar in a wild bullish trust to new record highs.  Futures traders would never let such a setup pass without jumping on it, nor would any Forex trader pass on it with their Dow 30 units.  

This expanded top makes us think we are getting into lower lows, but this would be just a short term thing, as the potential “E” wave would stop this bear dead in its tracks. If and when this market gets down to my “E” wave, then the majority should be very bearish and screaming that the worst of the crash is still to come. The more intense this screaming becomes, the greater that chance of a reversal. Both HDGE and the VIX would be ready to get dumped when the Russell 2000 hits the “E” wave. 

I have now posted about 3 indices all containing a potential triangle, and triangles are not the start of big bad bear markets, they are just corrections in a big bad bull market.  

There was also a double Head setup, and I’m sure another H&S pattern will be created once this chart hits my potential “E” wave, close to the 920 price level. 920 is also about a 40% correction, which is the general retracement level I use, for a 4th wave bottom.  

This all indicates that Cycle degree wave 3 is still ahead of us and not behind us.