Last week, the Russell 2000 pulled back into key levels as the stronger than expected inflation data and the quick rise in Treasury yields weighed on the stock market. There’s been also some profit-taking as we approach the FOMC rate decision on Wednesday with the risk of a hawkish surprise. Overall, the market is likely to remain supported as long as the Fed does not restart to hike rates, or the economy does not falter.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 fell all the way back to the key support zone around the 2020 level. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally into a new cycle high. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and increase the bearish bets into the next support around the 1920 level.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke below the lower bound of the rising channel. This breakout increased the chances of a bigger move to the downside, but the price will first need to break below the 2020 support to confirm the bearish setup. The sellers should start to pile in as the price retests the bottom trendline of the channel.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that around the bottom trendline of the channel, we can also find a minor downward trendline with the confluence of the 50% Fibonacci retracement level and the red 21 moving average. This is where we can expect the sellers to step in with a defined risk above the trendline to position for a break below the 2020 support with a better risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and increase the bullish bets into a new cycle high.
Upcoming Events
This week we have the FOMC rate decision on Wednesday where the Fed is expected to keep rates unchanged. The market will be on the lookout for hawkish surprises though following the stronger than expected inflation data. On Thursday, we conclude with the latest US PMIs and Jobless Claims figures,
