Look Out Below, Russell 2000 Just Completed a Head & Shoulders PatternOctober 01, 2014
With another weak performance by the Russell 2000 today (it was down 1.48%), the small cap proxy index has just completed a bearish pattern known by market technicians as a Head & Shoulders pattern. The pattern is formed when the price of an asset makes a high, retraces to some nearby support level, rebounds from support to make a new higher high, retreats again to that same support level, attempts to make a new higher high but fails, and finally retraces all the way back to and through the old support level. In simpler words, the price action goes out of it’s way to define support and resistance levels and support is eventually broken to the downside, portending further losses. It is said that the longer the pattern takes to develop the more meaningful it becomes. The Head & Shoulders pattern for the Russell 2000 has been under construction for most of the year, so it’s completion is definitely something to watch.