The Russell 2000 last week jumped following the miss in the US CPI report and bounced on a support zone after a small pullback. The market doesn't expect the Fed to hike anymore and it's pricing in the first rate cut in May 2024. At the moment, it looks like the market is still trading based on inflation and interest rate expectations, but the softening in the labour market as seen with the last NFP and Jobless Claims last week, is gathering pace and it's something to keep a close eye on.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 pulled back a bit from the key resistance around the 1820 level. The rally was indeed overstretched as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move. If we get a deeper pullback, the buyers will likely lean on the black upward trendline to position for another rally.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price bounced on the support zone around the 1770 level where we had the confluence with the 38.2% Fibonacci retracement level and the blue 8 moving average. We can also notice that in case the price continues lower and breaks the support, the buyers will have another opportunity at the trendline where there’s also the 61.8% Fibonacci retracement level for confluence.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent bounce on the 1770 support. From a risk management perspective, late buyers can now only wait for a break above the key 1820 resistance zone to pile in and join the rally. The sellers, on the other hand, are likely to lean again on the key resistance to position for a drop into new lows. The sellers should also pile in at every break lower as the buyers will likely fold pretty fast.
This week is pretty empty on the data front with the US on holiday for Thanksgiving Day in the final part of the week. Tomorrow, we have the FOMC Meeting Minutes but it's unlikely to be market moving given that it's three-weeks old data. On Wednesday, we have the US Jobless Claims report which is probably going to be the most important release of the week. Finally, on Friday, we conclude the week with the latest US PMIs.