Last week, we got another set of good economic data for the US with signs of further disinflation in the core inflation measures. The soft-landing narrative should be in full swing with resilient labour market, lower inflation, and lower inflation expectations. Nonetheless, the Russell 2000 price action remains rangebound, and at this point it might even be because we are getting near to the FOMC rate decision. Looking forward, the uncertainty is very high as we either get a soft or hard landing, but the weakness in other economies like the Eurozone skews the picture to the worse scenario.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 is consolidating near the key support zone around the 1820 level. The moving averages are crossed to the downside and the latest selloff into the support seems to be pointing to more downside ahead. The sellers will want to see the price breaking through the support zone to pile in even more aggressively and extend the selloff into the 1720 level.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the support zone near the 1820 level and even on this timeframe the moving averages point to the downside. Nonetheless, this is a key support, and the buyers are likely to step in with a defined risk below the level to target a rally into the 1920 resistance, and ultimately a breakout.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence with the MACD right near the support zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the buyers have another signal that the price might indeed rally from here, but it needs to break above the most recent swing high at 1866 to confirm that.
This week has just a couple of important economic releases with the FOMC rate decision on Wednesday being the highlight. The Fed is expected to keep rates unchanged, and the market will focus more on the Dot Plot and Fed Chair Powell’s press conference, although he’s likely to repeat that they remain data dependent. Moving on to Thursday, we will see another US Jobless Claims report, while on Friday we conclude the week with the US PMIs data.