The recent economic data gave the Russell 2000 and the market reason to break out of the Christmas holidays range and the bullish sentiment looks to be strong.

The beat in NFP numbers and the miss in AHE (Average Hourly Earnings) made the market to expect a goldilocks scenario: strong labour market without wage inflation. Moreover, the big miss in ISM Services PMI made the market to expect the Fed to stop hiking soon with an earlier than expected cutting cycle on the horizon.

Yesterday, the US CPI came out as expected, and what caught the market’s attention was another beat in Jobless Claims data, which showed a resilient and strong labour market. This should actually be bearish as it would keep the Fed on its track of hiking to 5% or more and then stay there for longer.

So, they may keep conditions tight for too long causing an overtightening of financial conditions. But the market is looking more at the goldilocks scenario at the moment, and we need to wait for it to start worrying about the above-mentioned risks before switching to a more bearish bias.

RUSSELL 2000 Technical Analysis

In the daily chart above, we can see how the price, after breaking out of the Christmas holidays range, started a strong bullish run to the upside targeting the resistance zone at 1920.

A break above that zone may open the doors for a run to the resistance at 2030. A failure at the 1920 zone and bearish fundamentals would make the price to fall back to possibly the support at 1650.

In the 1-hour chart above, we can see the recent economic data and risk events that boosted the bullish sentiment. The breakout started with the NFP and PMI data. The market then leaned on the defensive side going into Fed Chair Powell speech, but since he didn’t offer anything bearish, the market resumed its rally.

Finally, the CPI data in line with expectations and the beat in Jobless Claims gave the market another reason to keep the bullish momentum intact. The resistance at 1920 looks like the natural target for the current uptrend.

Zooming in to the 15 minutes chart, we can see the near term levels of interest. If the price stays above the 1873 level the market should maintain the bullish bias and target the resistance at 1920. If the price breaks below the 1843 level, sellers should regain control and target the range breakout level at 1800. Between the green and red lines the price would be in no man’s land and it shouldn’t offer any trading opportunities.