Yesterday, the Russell 2000 dropped following the big beat in the US PMIs as the rise in Treasury yields weighed on the market. The data was still in support of the soft-landing narrative with the commentary in the PMI report citing fastest output growth in seven months and sharp cooling in inflation. Given the resilience of the labour market and consumer spending, the rate cuts continue to be pushed back a little, but as long as the disinflationary trend remains intact, we can expect the Fed to proceed with the “insurance” cuts anyway.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 bounced on the key support zone around the 1920 level and rallied into the key resistance zone around the 2020 level where it got rejected. The sellers stepped in to target a drop back into the 1920 support, so from a risk management perspective, the buyers would be better off to wait for the price to come into the support before going long again.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly that the price got rejected from the resistance where we had also the 61.8% Fibonacci retracement level for confluence. If the sellers fail to sustain the bearish momentum and the price breaks above the resistance, then we can expect the buyers to pile in more aggressively to target new higher highs.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can notice that we had a divergence with the MACD right into the support zone which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the swing high around the resistance before the rejection. We can also notice that the price action formed what looks like a double top with the price yesterday breaking the neckline. This might be another bearish confluence for the sellers, so we can expect them to increase the bearish bets into the support zone.
Upcoming Events
Today we will see the Advance US Q4 GDP and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the US PCE report.