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mortiz

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Reply with quote  #1 
The Russell 4000 is comprised of US only (and territories) common stocks which are not pink slip, bulletin board, Over-The-Counter issues, and are over $1 or more in price as of May of each year.  These 4000 issues comprise the Russell 1000 (RUI), Russell 2000 (RUT), and Russell MicroCap indices.  RUT and the MicroCap index a 1000 issues overlap.

Therefore, the Russell 4000 (R-4K) constituents could be classified as the 4000 highest cap and quality US stocks that are publicly traded.  This thread reviews the group's breadth and volume-related money flow indicators as of Thursday, April 5, 2007.... first the breadth indicators.

The R-4K cumulative AD line, unlike the NYSE composite, NY common stock, and several large cap index AD lines, has yet to surpass its late February cumulative AD line high.  Note the R-4K AD line had been posting lower highs since late 2004 until late February when it nominally exceeded the August 2005 and early April 2006 highs.... a good sign the secondaries have been able to soak up some of the ample liquidity of late.

However, note there is a very short term divergence between the RUA price and the R-4K AD line.  If this divergence is not negated over the next several days, it could be a warning sign for prices a few weeks down the road.



The very short term divergence between price and the R-4K AD line is the work of the 3000 lowest cap members of the R-4K constituency... I track all four quartiles of the R-4K members, and the first quartile as measured by capitalization, the Russell 1000, is the only AD line not diverging in the short term and has achieved a new high.... the generals are leading the rally from the early March price lows thus far.



The R-4K AD McClellan Oscillator (MCO) is above zero again following a brief foray below zero following initiation thrust levels in March. 

A comment about the very extreme R-4K AD MCO low in early March, immediately followed by a positive initiation thrust level.  Normally, the negative extreme to positive MCO extreme in a very short time is a pattern that often results in lower price lows in the coming weeks. 

An interesting relationship with price has just unfolded.  Following the R-4K AD MCO initiation thrust was soon followed by a foray below zero, leading MCO students to conclude the MCO pattern consequences discussed in the previous paragraph was likely.  However, price exceeded the previous price high that accompanied the AD MCO initiation thrust which lowers the probability of a price retest or a lower low in the coming weeks. 



The R-4K AD McSum dipped below zero for a few days following the late February-early March price correction and for now, has resisted the possibility of small fish hook pattern, and has made a short term higher high, now at +212.  Over the coming weeks, I would expect this AD McSum to challenge the +500 zone once again.  The first hurdle will be +300 to +350 zone which served as stiff resistance in early 2006.



The R-4K volume indicators are showing bullish strength, particularly the UD cumulative line which has just broken out to the upside of a reverse head and shoulder pattern, now at new highs positively diverging with price.



The Russell 1000 issues are not the only quartile exhibiting strength in the volume related indicators.  Of the four quartiles of stocks comprising the R-4K universe, on the second quartile, the largest cap members of RUT, have not made a decisive new high in its cumulative UD line.

Below is the third quartile (RUT smallest 1000 cap issues) UD line.



The R-4K fourth quartile, dubbed the NanoCaps, cumulative UD volume line.... subtle new high, but a new high.  The strength in the smaller cap stocks' volume plurality suggest the money is flowing strong into those stocks advancing since the March price lows.  Many of these smallest cap issues are thinly traded, and they are the primary suspects holding the R-4K AD line from achieving a new high thus far.



The NanoCap cumulative $weighted UD volume line accentuates the prior comment regarding money flows into the smallest cap issues.



The R-4K UD volume MCO.  For those interested in studying the MCO action over the past three-plus years, note those times negative MCO extremes were soon followed by positive MCO extremes. Normally lower price lows going forward.... unless a higher price high occurred immediately following the initiation thrust (October 2005). 



The R-4K UD volume McSum did not violate zero during the recent correction and is in the process of overcoming possible McSum gap resistance zones created during the recent decline.



The R-4K $weighted UD volume McSum is already above its +500 line and is now charging toward the declining highs resistance trend line... strong money flow into all R-4K quartiles.


 
The R-4K $weighted UD volume MCO, same extremes pattern discussed previously.



The last volume related R-4K volume indicator is the Price-Change*Volume ($PCV) cumulative line.  This volume indicator bounced from its 5% trend (39 day EMA) and proceeded to rocket to new highs.... impressive and strong indication of money pouring into the US common stocks.



The R-4K cumulative AD line short term divergence is an annoying fly in the ointment for the near term bullish case, but if one subscribes to the notion the internals lead price, there is not much doubt new price highs in most indices are coming soon... and likely significantly higher prices in the coming weeks/months.

FWIW

Randy

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jmicou

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Reply with quote  #2 
Randy,

Thank you for sharing! Hmm. Russell 4000. The $PVC indicator is interesting.

Posting a chart of the Russell 3000.

Regards,

Johnny


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mortiz

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Reply with quote  #3 
Johnny,

How are the Russell 3000 targets determined? Fibonacci multiples?

As far as the "Russell 4000" goes, I think it was stated in the post where the 4000 issues come from:

1) Russell 1000 (theoretically 1000 issues, actually around 980 right now)

2) Russell 2000 (actually a bit under 1950 issues currently)

3) MicroCap Index: theoretically 2000 issues, 1000 of which are in the Russell 2000 (smallest cap 1000 from RUT) and 1000 issues not in the Russell 2000 or Russell 1000.

Here's a link from the Russell website explaining the "Russell 4000":

http://www.russell.com/News/Press_Releases/PR_Recon040307.asp

"The annual reconstitution of Russell's U.S. indexes captures the 4,000 largest U.S. stocks at the end of May, ranking them by market capitalization. After the new banding rules are applied, the largest 1,000 companies in the ranking comprise the large-cap Russell 1000, while the following 2,000 companies comprise the small-cap Russell 2000 and the bottom 2,000 stocks move into the Russell Microcap."
 
Somewhere, I've see the Russell company refer to the entire 4000 issues as the "Russell 3000E".  Don't know why they just don't call it what it is: the Russell 4000.
 
Anyway, those are the "4000" issues used as the baseline data for the above charts.
 
Have a great Easter weekend!
 
Randy
 
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jmicou

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Reply with quote  #4 
Randy,
 
Yes, those are fib calcs. On the SPX COT thread, posted a RUT chart with fib calcs.

I read about the 4000 after you posted this. Now will have to wait for a symbol?

Back at you.

Johnny

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