Russell 2000 – Weekly Analysis

CANDLES

The Russell remains strongly bearish in the long term, having closed April with decisive bearish candles on the monthly, 2-month, and 4-month frames. While the index has rallied over the past five weeks, Friday brought a series of technical failures that challenge the strength of that rebound. Notably, RUT failed to confirm bullish continuation candles on the daily, 3-day, and weekly frames. The most significant letdown occurred on the 3-day chart, where the index failed to negate an Advance Block pattern and also missed forming a continuation candle—both by just 30 basis points. Adding to this, the rally now includes 8 consecutive green candles, a streak that often signals exhaustion.

Interestingly, the 10-day and 15-day frames—both closing on Monday—are telling a different story. They’re on the verge of forming potential bottoming patterns, which could shift the mid-term outlook toward a more constructive stance.

This leaves us with a rare split: long-term frames remain bearish, mid-term frames are leaning bullish-neutral, and short-term signals have a strong chance of flipping bearish. Monday’s closure will likely determine where the pendulum swings next. It’s worth noting that Russell would need a gain of approximately 3.2% to close the 10D frame on a bullish note.

As of Friday, the index stands neutral—poised between competing pressures.

Classical Pattern – Double Top
(as discussed on April 19)

The Russell executed a textbook Double Top pattern in 2020—and based on current price behavior, it appears the index may be setting the stage to repeat that experience, much like Microsoft’s developing Head & Shoulders formation. While the pattern is still in the process of forming, it’s a scenario that deserves close attention.

The possible return to the 2020 lows has been featured on my all-time Russell chart for quite some time. This emerging setup simply reinforces that hypothesis from a different technical angle.

If confirmed, the implications could be significant. A move back to those levels would align with broader structural and momentum dynamics currently at play.

MACD Musings
(as discussed on March 15)

Russell is leading the charge in yet another critical development—it is the first among major U.S. indices to be on track for a monthly MACD cross. A signal of this magnitude is difficult to overlook. If the index fails to rally by at least 5% before the end of March, the cross will be recorded. However, even if this threshold is met, it may only delay the inevitable, as the MACD curve appears firmly set on its path.

Historically, this cross would fall somewhere between those recorded in 2018 and 2022, both of which led to significant declines. The concerning difference this time? Unlike those instances, where the index was only breaking through the 20-month moving average (MMA), Russell is currently losing the 50 MMA—a far more serious technical breach. If this level is lost and the MACD cross is confirmed, the next logical support zone could be found between the 100 and 200 MMA, implying a potential decline of 26-42% from the recent peak.

With Russell historically serving as a leading indicator for broader market moves, the question remains—will it once again signal the start of something bigger?

UPDATE: As of May 10, the Russell has declined 31% from its peak, reaching nearly the midpoint of the projected target area and rebounding off the lower boundary of the Bollinger Bands. This move could represent a potential bottom for the broader correction. However, despite five consecutive weeks of rally attempts, the index has only managed to confirm a bottom on the 1- to 3-day frames—casting doubt on the strength and sustainability of the advance.

This week’s multiple candle failures, combined with a newly formed bearish MACD cross on the 2-month frame, suggest that the index may be preparing to resume its downward path.

For now, the Russell remains bearish until a confirmed reversal appears on the weekly frame.

ELLIOTT WAVES

Micro Path

The Russell may have completed an impulsive move down and is now forming a wave up that shows more overlap than typically seen in an impulsive wave.

This move may represent the first leg of a zigzag (abc) for wave B in red. Wave (iv) in blue also remains a possibility—and if that path plays out, it could result in the most structurally damaging and deepest correction. The green count remains on the table, but its probability has further decreased after this week.

At this point, all three counts remain valid, with the red and blue having slightly better odds.

Mid Term

There are no changes to the mid-term outlook at this stage. The wave has reached the target zone for wave C of IV; however, several technical indicators suggest one more lower low is likely in the cards.

Green:

In this scenario, wave B completed above the origin of wave A, making it a running flat. Waves 1 and 2 of C are possibly complete, wave 3 is underway.

Blue:

The index formed an expanding ending diagonal and is falling with the first wave down which could be wave A of a larger correction.

Summary:

Following April’s close, which further reinforced the long-term bearish outlook, the Russell Index forecast remains largely unchanged, aside from a few minor technical adjustments. Despite a recent 19% rebound, the broader picture remains firmly bearish, pointing to the potential for a correction that could stretch across multiple quarters—or even years.

From an Elliott Wave standpoint, the index appears to have completed a significant impulsive move down, with a high probability of another leg lower still to come. In either of the leading scenarios, the corrective phase is far from over.

That said, Monday could be pivotal. If the Russell delivers a strong rally and manages to flip the 10- and 15-day frames bullish, it may temporarily shift the momentum and open the door to a mid-term recovery.

For now, the Russell remains firmly bearish until a clear and confirmed reversal emerges, at minimum, on the weekly time frame.

Happy Trading!