Last Friday, the Russell 2000 rallied strongly for no apparent reason with the market seemingly careless about the US CPI release tomorrow. Overall, the path of least resistance remains to the upside given the pickup in economic data with even the leading indicators turning around. There are still risks on the inflation front though, but the market looks confident that even if we see some short-term reacceleration, the Fed will just keep rates steady and if the economy is able to support them, then it might be even better. Nonetheless, a hot CPI report could provide a pullback, so that would be something to watch out for.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 reached the key resistance zone around the 2020 level where we can now expect the sellers to pile in with a defined risk above it to position for another drop into the 1920 support. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for new highs.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price action could form a big bearish flag, but the price will need to break the current channel to the downside to confirm the pattern. A break to the upside though, would invalidate the pattern and trigger a stronger move to the upside as the buyers will likely pile in with even more conviction and target new highs.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline inside the channel which will act as support for the buyers in case we get a pullback from the top trendline. If the price were to break below the trendline though, the sellers will increase the bearish bets into the 1920 support and eventually target a breakout.
Upcoming Events
This week is relatively light on the data front with the US CPI report being the main highlight. We start tomorrow with the release of the US CPI where the market will want to see if there are indeed signs of a reacceleration or not. On Thursday, we will get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.
