The soft-landing narrative is in full swing in the markets as the US CPI report last week missed expectations across the board. The strong US labour market and the rising consumer sentiment add to the expectations that the US might avoid a hard landing with inflation coming back to the Fed’s 2% target without too much damage in the economy. Moreover, the US Retail Sales missed expectations on the headline number but the Control Group, which is seen as a more precise gauge of consumer spending, beat expectations by a notable margin. Therefore, unless we start getting some ugly economic reports or we have a black swan event, it looks like nothing can stop the Russell 2000 from reaching new highs.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 bounced on the 50% Fibonacci retracement level and eventually managed to sustain the breakout above the 1920 resistance zone as the US CPI missed expectations across the board. The buyers are now eyeing the 2030 resistance area where we should find strong sellers stepping in with a defined risk above the level to target a fall into the 1920 support.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we now have trendline defining this current uptrend into the 2030 resistance area. If we get a minor pullback into the trendline before reaching the resistance zone, the buyers should lean on it and the red 21 moving average for further support to position for another upside extension. On the other hand, if the price falls below the trendline, we should see the sellers piling in to target a fall into the 1920 support.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the Russell 2000 is very close to hit the resistance zone, so the buyers may start to be more cautious here and wait for a fundamental catalyst to give some support. What will happen here is likely to decide the next major move as a break above the resistance zone would open the door for a run into the 2135 level, and a failure to do so would send the market back into the 1920 support and possibly lower.
Upcoming Events
Today the main event will be the US Jobless Claims report as the market is attentive to the labour market conditions. Given the soft-landing vibes, it’s unlikely that a small miss would cause too much havoc in the market and in fact it might be just another opportunity to buy the dip. On the other hand, a big miss should trigger some recessionary fears and take the Russell 2000 lower, while a beat should keep the soft-landing narrative intact and lead to higher highs.
