Everyone talking about Russell breaking out higher, True or False?

Everyone talking about Russell breaking out higher, True or False?  The markets are close to the all time high on all the US market index except for the Russell.   Everyone therefore is focusing on the Russell to see if it breaking resistances because this is the only US index that is lagging.

Yesterday, I keep on hearing how the Russell index is breaking higher.   Is this True or False?  Let’s allow the charts to answer this question because that charts illustrate the actions behind people.

Below is the daily chart of the Russell Futures ($TF) provided by eSignal.   The daily shows price held the top of the cloud and now is trending.   The daily is a short term view and you expect to see if the other US indexes are close to the all time high.   The question is if the Russell Futures is breaking resistances.    On the daily timeframe, there is really no Direct resistances so we have to go to a higher time frame.

2016-06-07_tf_d

Below is the weekly time frame.   On the weekly time frame, the major resistance is 1182.12.   This resistance controls the long term sentiment for the Russell Futures.    We are now just approaching it.   Therefore, this upward movement is just getting us to the major resistance.   It is not breaking resistances which needs to happen.

2016-06-07_tf_w

Below is the monthly chart.  Price went to the top of the cloud and bounced off it.   We are now back to the same resistance that held that caused price to go to the cloud.   This resistance has to be broken in order for the Russell Futures to go higher long term.

2016-06-07_tf_m

 

Overall, yes, the markets are close to their all time high.    It is very dangerous to add any new bullish positions at this time.   The reward is limited so it is extremely hard to get a reward/risk that is 3:1 or higher.

You could look for pull back trades on some stocks but does that really make sense?  You will be asking for a stock to be at a pull back support when the markets are at a resistance.    If a stock is strong right now, it should be testing it’s major resistance just like the markets.  If it isn’t, it is weak compared to the market and that is something you definitely don’t want to buy.

As a result, you need to wait for these market resistances to be broken and then price to pull back to them in order to add any new positions.   If you are in any existing positions, you should be tightening your stop and protecting your profits.

Patience is the key to making money during these times!

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About the Author Manesh Patel