Last Friday, the Russell 2000 ended the day negative following the US NFP report. There was something for everyone. In fact, for the buyers, the payrolls number beat expectations while the average hourly earnings missed. For the sellers, the unemployment rate jumped to 3.9% and the household survey showed a third consecutive month of job losses. In this case, the technicals should help in determining the next move for the market as we approach some key levels.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 managed to break above the cycle high recently but failed to extend the rally as the price pulled back following the NFP report. We can expect the buyers to step in around the previous cycle high with a defined risk below it to position for a rally into new highs. The sellers, on the other hand, will want to see the price falling further to pile in and target the 2020 support zone.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been trading inside a rising channel. From a risk management perspective, the buyers will have a much better risk to reward setup around the lower bound of the channel where they will also find the 61.8% Fibonacci retracement level for confluence. The sellers, on the other hand, will want to see the price breaking below the bottom trendline to increase the bearish bets into the 1920 support.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher diverged with the MACD. This is generally a sign of weakening momentum often followed by pullbacks or reversals. We can see that we have a strong support at the previous cycle high where we can find the confluence of the black trendline and the 61.8% Fibonacci retracement level. This is where the buyers will look to buy the dip and position for new highs. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop into the lower bound of the channel around the 2020 support zone.
Upcoming Events
Tomorrow we have the main event of the week, that is the US CPI report. On Thursday we get the US PPI, the US Retail Sales and the US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.
