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Good evening Slope! I wanted to take a look tonight at a market structure within the Russell 2000 that I am tracking. As you know, the Russell has yet to break its 2011 high, diverging from SPX. Let's take a look at how the Russell formed its 2011 top, and see if there is anything we can gain from it.
Below is a daily chart of the Russell. Notice the three key peaks I have noted. Peak 1 is the ultimate high that was formed. After the high, there are two additional key peaks that were made. Peak 2 came close to testing the highs, but failed. It then made a slight retracement, before quickly moving back up to form Peak 3. Peak 3 also failed to reclaim Peak 2. When the trendline breaks, connecting the June '11 lows through July '11 lows, a collapse ensues.
"On September 21, 2011, the FOMC announced that it would extend the average maturity of its holdings of securities–by purchasing $400 billion par of Treasury securities with remaining maturities of 6 years to 30 years and selling an equal par amount of Treasury securities with remaining maturities of 3 years or less–by the end of June 2012. The FOMC also announced that it will reinvest principal payments from its holdings of agency debt and agency MBS in agency MBS. In addition, the FOMC will maintain its existing policy of rolling over maturing Treasury securities at auction."