Russell 2000 – Road Map

Russell may have just completed the Double Ending Diagonal structure we warned about on July 1 — this could be one of the most important technical developments in small caps in months.

Ending diagonals often carry powerful implications because once the structure completes, price frequently retraces sharply toward the origin of the pattern. In Russell’s case, that means the next move could define not only the short-term trend, but also the larger downside target zone that traders should be watching closely.

In this update, we review the latest Russell signals and the downside targets that may come into play if the structure starts to unwind.

: Ending Diagonals :

Russell moved below the May high and technically confirmed the completion of the diagonal.

I continue to maintain the hypothesis that at least two ending diagonals of different degrees may have completed simultaneously. There could be more if we zoom out, but we will discuss that in a broader report.

Because diagonals often bring price back toward the origin of the pattern, a sharp drop of 10–11% or more should not come as a surprise. The broader market is likely to follow, at least to some extent.

Below is an excerpt from Prechter’s book on diagonals: