Technical AnalysisThree-year lows amid breathtaking volatility; 650 now upside keyIn just two weeks, the Russell 2000 (NYSE:IWM) has gone from the highest weekly close of 2008 to the lowest weekly close since May 2005. Lack of upside followthrough dulls bullish reversalSmall-cap stocks were unable to build on the amazing bullish reversal from earlier this month, suggesting that the manic rally was more about squeezing out weak shorts than it was about a true impending breakout move. Close at highest weekly level since last DecemberAfter suffering the two largest one-day declines of the year the Russell 2000 rebounded late in the week to close at the highest weekly level since last December. Russell 2000 charts still bearish despite slight gainsThe news was basically awful this week, yet small-cap stocks were up slightly. But remember, this is a technical analysis column... Russell 2000: Bullish hammer vs bearish outside formationA fascinating battle will play out Monday morning between the heroic comeback forged on daily charts by Friday’s valiant recovery versus the dominant bearish chart patterns in play on weekly studies. Lazy August rally now faces September testEven though August was a kind month to small-cap stocks, the chart structure is still dominated by bearish patterns. Russell 2000: Double top dominates immediate pictureEven though the market had a "feel good" finish to the week via Friday’s 1.7% bounce, the Russell 2000 still faltered 2% for the week, doing little to negate a budding double top formation. Small caps at 2008 weekly highs, but daily charts show bearish reversalWe have good news, and we have bad news... Bullish pattern, upside breakout on daily chartsThis was a big week for small-cap stocks as the market finally broke free of an extended consolidation range. Russell 2000: Summer doldrums, or market indecision?For the week, the Russell 2000 (NYSE:IWM) gained 0.8% and action was confined within the previous week’s ranges, which seems quite odd for a week that was littered with economic data minefields and which culminated in a head-scratcher of a jobs report Friday. Investing 101Technical Analysis: Using the Past to Forecast the FutureDig deeper: technical analysis is an analytical system that looks for buy and sell signals in patterns formed in charts of stock prices.
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