The recent rally in the Russell 2000 that was based on “soft landing” hopes as the labour market data continues to show strength and the inflation data moderates, got sort of a wake up call with the latest retail sales report which showed a big miss to the expectations and the previous numbers were revised lower.
Even in light of the weakness in the economic data, the Fed members repeated that they will still tighten to their projected terminal rate and stay there for quite some time. This makes the things harder for the market as the Fed doesn’t want to ease too early and risk another wave of strong inflation considering also that China has reopened its economy and commodity prices may surge again.
RUSSELL 2000 Technical Analysis
In the daily chart above, we can see how the price after breaking out of the Christmas range rallied to the resistance zone at the 1920 level. That resistance has been holding since September 2022 and the bulls seem to lack conviction in breaching that area.
The price may now fall back to the resistance now turned support at the 1800 price zone. If the price falls further below that level, the bears will start to target once again the low at the 1640 price area.
In the 1-hour chart above, we can see all the recent set of catalysts that pushed the price out of the Christmas range and gave the bulls control until the resistance at the 1920 level.
Retail Sales Miss a Big Question Mark for Russell 2000
The price got rejected as the Retail Sales report showed a big miss to expectations and awakened the recession fears that the market ignored until then.
Zooming in to the 15 minutes chart, we can see the loss of momentum to the downside depicted by the price divergence with the MACD indicator below. If the price breaks below the red line, the bears will still have enough control to target the support at 1800 level.
Given the divergence though, it’s possible that we first see a pullback to the 1882 level before the bears try another run to the downside. If the price breaks 1882 to the upside though, it’s possible that the bulls will regain control and target again a breakout of the 1920 resistance.
