On the daily chart below, we can see that the Russell 2000 is still stuck in a range between the 1723 support and the 50% Fibonacci resistance since the collapse of the Silicon Valley Bank. The Russell 2000 index is more sensitive to regional bank stocks and that’s why it underperformed the other major stock indices. On the monetary policy front, the Fed is leaning to a pause in June, although it keeps a door open for another hike in case the economic data remains strong.
On the fiscal side, the debt ceiling talks are still ongoing, and we keep having rallies on positive news and selloffs on negative ones. For context, the debt ceiling has always been raised and it’s not the first time that we go through this drama. Although there’s a higher chance of a US default this time, the market is still confident in a resolution eventually.
Russell 2000 Technical Analysis
On the 4 hour chart below, we can see that due to the fact that the debt ceiling is expected to be raised eventually, the Russell 2000 had bigger rallies on positive news and shallower selloff on negative ones. This should be a classic “buy the rumour” type of trade where the Russell 2000 maintains the uptrend and the buyers buy the dips on negative news.
The red long period moving average is acting as a dynamic support for the buyers and it’s likely that we’ll see the price starting to rally here and breaking above the swing resistance level at 1795. The ultimate target for the buyers should be the 50% Fibonacci retracement level.
On the 1 hour chart, we can see that the buyers couldn’t sustain a break above the 1795 resistance as the divergence with the MACD and the negative news on the debt ceiling talks weighed on the Russell 2000. The selloff stalled at the 1768 swing support level. The sellers will want to see the price breaking lower to pile in and extend the fall back towards the 1723 support. The buyers, on the other hand, should start to come as soon as the price breaks above the 1782 level to target a break above the 1795 resistance and then the 50% Fibonacci retracement level.
