Last Friday, the Russell 2000 rallied following the strong University of Michigan Consumer Sentiment report as the market continues to see a goldilocks economy. Despite all the good news, the index continues to lag the other major indexes which are pushed higher by large cap stocks. On the other hand, the strong economic data is making the market to price out the rate cuts, which might eventually dent the economic and the stock market performance.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 bounces on the key support zone around the 1920 level where he had also the 38.2% Fibonacci retracement level for confluence. This is where the buyers stepped in with a defined risk below the support to position for a rally into the highs and targeting a breakout.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is now at a key trendline where we can find the confluence with the 50% Fibonacci retracement level and the red 21 moving average. This is where the sellers are likely to pile in with a defined risk above the trendline to position for a drop back into the support zone targeting a break below it.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can notice that we had a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the trendline but if the price were to break above it, a reversal would be confirmed and the buyers will likely increase the bullish bets into the resistance zone.
Upcoming Events
This week is a bit more tranquil on the data front with the major releases scheduled for the final part of the week. We begin on Wednesday with the US PMIs while on Thursday we will see the Advance US Q4 GDP and the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the US PCE report.
