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Russell 2000 Daily Chart with Current Implied Volatility Band Levels for Jan. 16, 2015

01-16-15 RUT Daily Chart

In our prior commentary it was anticipated that Sellers would return and attempt to take control during Thursday's session. They did indeed with extreme prejudice. The wide range close as the lows the of the session suggests lower prices are expected during Friday's trading.

The 200 Day Moving Average (200 DMA) waits below and is a likely target for probes lower. If prices extend and perhaps break under this critical support level, it should be brief as 200 DMA rarely fail the first test. What's more, RUT would be extremely oversold and the chances of a sharp reflexive oversold rebound are very good.

Due to overnight European headline risk (both geopolitical and Central Bank - re: Switzerland) caution is advised as sharp price movements (both up/down) can occur without warning. Adjust trading exposure size to accommodate the elevated volatility.

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