Russell 2000: Friday plunge disconcerting

Small-cap stocks have been consolidating in a mild upward draft off the multi-year lows forged in March. The corrective push has been orderly in nature and consistent with bottoming action, but Friday’s hard slide in the Russell 2000 (NYSE:IWM) back below the 700 swingline is cause for mild concern. The trading action through the coming week’s slate of key economic reports could set the stage for either another leg up on the rally, or it could solidify the risk of retesting the March lows.
It typically takes time to build a foundation for a major low, especially one that saw small caps wipe out over 25% of their value in a relatively quick span. For now, the chart setup remains consistent with a market that is struggling to re-establish value. Even if we slip through key support points next and embark on a retest of the 650-640 zone, it might not be a terrible sign for the market over the long haul.

From a pattern standpoint, the Russell 2000 formed a double top this past week near the highs. A similar formation back in early February foreshadowed the move to fresh lows in mid-March, and this past week’s failure should be respected as long as the market holds below 700.
Going into the coming week’s trading, the key short-term points to watch are at 681, which marks a 50% Fibonacci retracement of the March rally. In addition, there is chart-related support in that region from the late-March trough. A slide through

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