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Like almost every index on the planet, Small Caps have experienced softness of late. The decline took the index down to rising channel support the week before last, where it created a reversal pattern (bullish wick), at support.

Last weeks  rally in stocks, pushed small caps to the top of its short-term falling channel at (1) above.

The long-term rising channel remains in play.

In my humble opinion, a big time “Softness Test” is in play at (1). A breakout would be a plus, which would go a long way to saying the test a support was important.

Should small caps fail to breakout above resistance at (1) and then break 3-year support, odds are high, softness continues.

I would think both bulls and bears will be very interested in what happens at (1) the next couple of weeks.