Fundamental Overview
The Russell 2000 has been outperforming the other major indices recently as there’s much more value compared to the S&P 500 or the Nasdaq. The market is now looking forward to the next year with Trump’s policies being a positive driver for growth.
The only bearish reason we had for the stock market was the rise in Treasury yields. That’s generally bearish only when the Fed is tightening policy though not when yields rise on positive growth expectations.
Right now, the Fed’s reaction function is that a strong economy would warrant an earlier pause in the easing cycle and not a tightening. That should still be supportive for the stock market in the bigger picture.
If the Fed’s reaction function were to change to a potential tightening, then that will likely trigger a big correction in the stock market on expected economic slowdown. For now, the pullbacks look as something healthy and opportunities to buy the dips.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 is consolidating around the all-time highs. The buyers will want to see the price breaking higher to increase the bullish bets into new highs. The sellers, on the other hand, will keep on piling in around these levels to position for a drop back into the 2290 support.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a rangebound price action between the 2418 support and the 2461 resistance. The market participants will likely keep on playing the range until we get a breakout on either side.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have an upward trendline defining the bullish momentum on this timeframe. The buyers will likely lean on it to position for a break into new highs, while the sellers will look for a break lower to target a pullback into the 2418 support. The red lines define the average daily range for today.