RUT and SPX stage a counter downtrend and rally yesterday, though not before they have to fight off a very down futures before the market opens.
So, is the reversal in play now?
Let’s look at the charts.
For the RUT, we can see that the rally is more substantial. However, it fails to break above the previous day’s candle high.
For the SPX, we can see that the candle is still inside the previous bar. And that give us an ‘inside bar’. With an inside bar, the risk-reward is huge given that the inside bar is much shorter; hence reduced risk if we have the proper stop-loss in place.
RUT being the small caps index also shows risk appetite. With the RUT trying to break through its previous day high, suggest that investors/traders risk appetitie is back.
Remember, in my previous chart, Â RUT forms a double top and refuse to go higher. The sign is much clearer on RUT than on SPX that the market is losing steam back then.