Like almost every index on the planet, small caps have experienced softness of late. The decline took the index down to rising channel support the week before last, where it created a reversal pattern (bullish wick) at support.
Last week's rally in stocks pushed the Russell 2000 to the top of its short-term falling channel at (1) above.
The long-term rising channel remains in play.
In my opinion, a big “softness test” is in play at (1). A breakout would be a plus, which would go a long way to saying the test of support was important.
If small caps fail to breakout above resistance at (1) and then break 3-year support, odds are high that the softness will continue.
I think both bulls and bears will be very interested in what happens at (1) over the next couple of weeks.
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