There is good news and bad news on the chart picture for the Russell 2000 (NYSE:IWM) after this past week’s action.  For now, the good news is slightly better than the bad news – but only by a diminishing nose. The first obvious bit of good news: small-cap stocks FINALLY closed out a week above opening levels, which hadn’t happened in an extraordinary run of five consecutive weeks. Even the worst bear market moves don’t usually serve up that kind of relentless beating on the bulls.

Another bit of good news – and it’s a perverse bit of logic, but bear with me here: we finally saw volatility ramped up during this week’s hectic action. If you’ve been  whipsawed by the manic price moves this week you may be in no mood to think about the good of volatility (especially if you sold Fannie Mae or Freddie Mac early Friday morning), but it’s worth noting that when the market pounded out a bottom in both  January and in March, volatility levels shot higher. During the slide off the Junehighs, volatility levels, as measured by the CBOE’s Volatility Index (VIX) never really amped up because the move was steady and sure...not really whippy.  Unfortunately, the VIX is still well off the spike highs seen in January and March, but the breakout move is reasonably similar on charts.

And finally to round out the “good news” front, we saw a bullish outside reversal on
Russell 2000 charts Friday. This marked the most impressive bullish formation on daily studies since the breakdown off the June highs. While it lacks the punch of a reversal  formation on longer-term weekly studies, it is still a powerful short-term pattern that commands respect...

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