Russell 2000 Daily Chart Review

 

 

Since early 2016, the Russell 2000 has also soared. To call this a true impulse, you would be forcing a wave count that is not there. Every basic rule of an impulse has been broken, which only leaves us with a diagonal 5th wave. This makes for a potential high degree top completed, after which this Russell 2000 can join the bearish ride down.   Starting into an impulse count will not work, as diagonals seemed to be the main flavor this month.  

Since we may be heading down to another, “A” wave, I see no reason for the diagonals to suddenly go away, or turn into pretty impulse waves.  Making impulse waves does not help us in clearing up the problem of giving us a location. Still, this Russell 2000 needs to show us much more downside,  just to get past a point where it no longer threatens a major push to the upside. 

The danger of some wild bullish move still to come is reduced once we calculate the Gold/Russell ratio.  This ratio now sits at 1.05, which means that you will need 1.05 ounces of gold to buy one unit of the Russell 2000.  This is now the record as the most expensive calculation I have taken. This is not a good number and insane to base a long term bullish position on. Yet the speculators or “dumb money” have their largest bullish positions. This is a recipe for a disaster to happen. 

All we need is the media to jump on some fundamental reasoning and the rest will become history. In fact, there is a trade war going on where Korean companies are being kicked out of China, with tourist being advised not to book into Korea. Many companies no longer will set up manufacturing in China as the risk is increasing dramatically. 

Only time will tell what fundamentals the mainstream media will promote, but I’m sure they will come up with something to captivate their readers.