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In the May 9th and 14th editions of the Wagner daily we discussed the head and shoulders pattern that was forming on the small-cap Russell 2000. In the May 9th newsletter we stated, “if the Russell 2000 loses support of the neckline at 785, then the predicted selloff would be to 720. We will be monitoring the Russell carefully, as its next test of the 785 mark could result in the loss of support and a significant move lower”. On May 14th we commented that, “(a move by IWM) below Friday’s low of $78.42 could result in a break of the neckline of the head and shoulders pattern. A drop below this key market would likely result in a quick move to the 200-day MA for IWM. Yesterday, IWM did in fact breach its neckline and now appears headed for the 200-day MA. In all likelihood, IWM will find support at its 200-day MA. Typically, when a neckline of a head and shoulders pattern is broken, a subsequent bounce will occur back up into resistance near the neckline. This bounce generally results in another shorting opportunity.

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