Courtesy of Doug Short.
If any index has been beneficial to investors for clues about how or when to adjust portfolio weightings, the Russell 2000 over the past few years gets the prize.
The Russell 2000 back in 2007/08, created a bearish rising wedge, suggesting that investors should underweight risk assets. Once the bearish rising wedge broke, the Russell 2000, which was at an all-time high at the time, fell hard!
Now let’s turn the clock forward and look at the Russell’s message in 2011 … which has been almost exactly the same as in 2007/08!
A rising wedge took place of late, at the same levels as 4 years ago, which was suggesting again to “lower risk exposure!”
If history is any guide, the Russell is suggesting a counter trend rally, until it hits key Fibonacci resistance levels and then a continued decline.
Does the pattern appear to be seeing a Double? It does to me. Will it repeat exactly the same going forward as it did in 2007/08? Odds would say no, yet so far the Russell has been excellent in helping investors and professional investors decide when to increase and decrease portfolio risk!
(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com
