Russell 2000 Small Caps Back In Favor?

By Bennett Tindle November 9th, 2020

The markets opened with a large gap higher on Monday, sending the Russell 2000 small cap index (RUT) north of 1700 in what could be the makings of a very significant breakout. Back on October 7th during our TA Live Wednesday LiveStream show, our founder Todd Gordon prompted me to review the chart of the RUT. It’s been awhile since we’ve had any truly clear pattern developments in this index, but based on my wave count we had finally completed 5 waves up and 3 waves down originating off the March 2020 lows. Then things got even more interesting…

Shortly after the broadcast I identified a very interesting development on the weekly chart in the RUT. I noted two large consolidation efforts, both of which were into previous Presidential election cycles (2012, 2016). In fact, the index broke out of that consolidation in both instances directly following the elections! I then charted and identified the makings of yet another large corrective consolidation — this time into the November 2020 elections! When you add to that the bullish Elliott Wave pattern we are tracking, you have the makings for what could be a multi-year breakout.

Now I have to admit… I was a bit skeptical of the very short and shallow nature of the Wave 2 correction that we discussed during our TA LiveStream on October 7th. But that is what’s so fantastic about the wave principle! Elliott gives you guidelines, parameters and associated key Fibonacci retracement levels to substantiate your wave count! Tune into the video below as we review the playback of the breakout from the October 30th lows, walking you through the precise resistance and support zones we were tracking to validate this development and look to get long small caps.