Back in August I posted this on the blog about the Russell 2000 and what would signal a potential important stock market top of significance. Here is an update to that analysis.
Since August the Russell and other indices have tested important downside Key Reference Areas and in each instance have done what was necessary to relatively quickly reaffirm a bullish outlook. Now we see the Russell 2000 only 4% from a new 2012 (and all-time) high, the S&P 500 is only 3.11% from a new 2012 high and the Dow is 3.2% from a new 2012 high. It appears very likely that each of these indices will test or make new highs before this rally phase is over.
On a longer term basis, the Nasdaq 100 is a concern for the stock market bulls, as it is 8.00% from a new 2012 high, and it is unlikely the other three primary indices will be able to sustain a long-term move higher without participation from the index that until recently has led this bull market that began at the March 2009 low. The Nasdaq 100 needs to close above 2700 relatively soon or it may be an early signal of something awry with our bullish outlook.
As long as the Russell 2000 is trading above 805 we will be looking for new highs in one or more of the primary stock indices. A close below 805 is an initial signal at least an intermediate term top is likely in place.