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Sunday, February 22, 2009

Russell 2000

Yahoo finance has data on the Russell 2000 going back to September of 1987 (I don't know how long the index itself has been in existence, but probably a little longer than that). Luckily, that includes the October 1987 crash, which provides a good start point for a fibonacci retracement calculation. The results of the retracements are:

38.2% 569.82

50% 481.27

61.8% 392.72


I took those levels and put them on a one year chart of the Russell. As you can see, the area between the levels have provided a consolidation zone. Is this coincidence, or is there something about the retracement levels that have an important psychological effect on traders?

The Russell 2000 is the index I track most closely, but information on the internals is not easy to find (if it exists at all). When the Russell is underperforming the big cap indexes (as it did during 2007), it's a pretty good bet that the market is headed for a downturn.

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