The Russell 2000 surged to new highs following the miss in the US CPI report. Looks like the market is still trading based on the inflation and interest rates expectations and ignoring the softening in the labour market and growth data. Yesterday, the US Retail Sales were more tepid compared to the prior months, but they still came out better than expected, and the US PPI data missed forecasts by a big margin across the board. The bears are having a hard time to fight this positive sentiment and perhaps it will take a clear uptrend in the unemployment rate to switch the market’s focus.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that following the miss in the US CPI report, the Russell 2000 broke above the trendline and surged into the key resistance zone around the 1820 level. The price yesterday rejected the resistance as the sellers stepped in with a defined risk above the level to position for a drop back into the lows. This candlestick formation is called “shooting star” and it’s generally a reversal pattern, but in this case, it might just be a signal for a pullback from overstretched levels.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the buyers will have two support zones where they might lean on to position for a rally into new highs. The first one stands around the 1775 level where we can find the previous swing high, the 38.2% Fibonacci retracement level and the blue 8 moving average. The second one stands around the upward trendline where we can find the confluence with the 61.8% Fibonacci retracement level and the red 21 moving average.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the support levels for the buyers. It’s impossible to know which one will be the right one, so it might be a good idea to split the long position in half. The sellers, on the other hand, will want to see the price breaking below the upward trendline and the 1720 support to invalidate the bullish setup and position for a break below the cycle lows.
Upcoming Events
Today the market’s focus will be on the latest US Jobless Claims figures given the recent softening in the labour market data.
