Small Caps: The Fractal From Hell

To say the least, the Russell 2000 (small caps) looks like it could get ugly. What we’re noticing since 2014 is the surfacing area of the liquidity gaps increase over time highlighted on the chart below. What is concerning us today, is that the next potential liquidity gap could be right around the corner leading to a much greater surface area than 2H15-1Q16 downdraft. The overall structure appears to be a symmetrical triangle that will eventually lead to a major trend direction.

 

As for now, it seems small caps are about to enter a world of pain following the collapse of the dollar. Perhaps, make America great again was just an illusion and the disappointment phase is imminent.