Russell 2000 swingline remains at 450

Using strict chart-speak, the January stock market collapse is consistent with a corrective pullback off the November-January rally. Of course, chart-speak doesn’t fully appreciate the relentless volatility and false breakouts of recent price direction. Aren’t these elongated consolidations supposed to be a little more vanilla and a lot less jalapeno?

I suppose it’s only fitting that the market collapsed hard Thursday and Friday to wipe out what looked like the first winning week of the New Year. After all, if the market is going to carve out the worst January in history, it might as well do it with a bang. On weekly candlestick charts, we see four consecutive “red” or losing formations, something that didn’t even take place when the market was in freefall mode in September through November.

Much will likely be made the next few days by stock market watchers of the so-called “January Effect,” one interpretation of which holds that the market during the next 11 months takes it cues from what happens in the first month. Like many stats, they can be bent all kinds of ways to further whatever argument you want to make. For me, it’s a debate that is fun but which serves little purpose, because in recent years various iterations of the “January Effect” have been little more reliable than pure chance. There are two key points I’m watching next week: 450 and 427.

Regular readers of this column will know all about 450. It is our key swingline for the ...

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