I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Monday, December 14, 2009

See No Russell, Hear No Russell

Columbia, Gumbo and I all believe that the Russell has already made it's Primary 2 peak. I think it is the only major index to do so, and is a major indicator of the risk aversion built into the markets (money going into "safe" large caps and avoiding "risky" small caps). I talked about that risk spread here Another View of Risk. There are other sectors that have already made their P2 peak (such as Financials), but the Russell is the only broad market index to have done so. The fact that small caps are heading down before blue chips is *very* bearish.

Gumbo was asking how to reconcile the Russell count (http://marketthoughtsandanalysis.blogspot.com/2009/12/this-is-why-columbia-rocks.html#comment-25741547) and the ending diagonal that I showed in my last post: This is Why Columbia Rocks

Here is my take on that scenario (using the Russell Futures). I think a Minor 2 on the Russell fits very nicely with a Minor C Ending Diagonal for Intermediate Y of P2 for the broader markets.

A Word on counts vs. attitude

Here is a comment I left on Columbia's weekend post:

Col said: On paper, I am very short-term bullish, but in real life I am bearish, to me what little upside there maybe available, it is not worth the risk of a major sell-off happening at any time, with-out warning.

binve replied: EXACTLY! I love how in the CIL we have both been labeled as "bullish" ... LOL!!! Just because we acknowledge that the count makes a higher high does not make us bullish. I don't think we could find two bigger bears than us :). And in a way, I am *happy* to get one last move up. Not to be long, but to get a better deal on shorts :)
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