Last Friday, the Russell 2000 extended the pullback from the highs reached after a strong rally triggered by the FOMC decision. This might have been just a profit-taking move from overstretched levels as nothing has changed in the data as we got strong US Jobless Claims figures and good US PMIs. Looking ahead, we are approaching a new month where we get the key economic data including the US CPI. The path of least resistance though remains to the upside until the labour market cracks or the reacceleration in inflation gets confirmed and we get some hawkish repricing in interest rates expectations.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 pulled back from the cycle high following a strong rally triggered by the FOMC decision. We can notice that the price continues to diverge with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. This is something to keep an eye on as a break below the key 2020 support zone would confirm the reversal and possibly take us back to the 1920 support.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price got overstretched recently as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move. In this case, we got the pullback, so we can expect the buyers to start looking for a dip-buying opportunity.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that besides the 4-hour 8 moving average, we can also find the confluence with the trendline, the 50% Fibonacci retracement level and the red 21 moving average. This is where the buyers are likely to step in with a defined risk below the trendline to position for a rally into a new cycle high. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop back into the 2020 support.
Upcoming Events
This week is going to be shortened by the US Holiday on Friday. Tomorrow, we have the US Durable Goods and Consumer Confidence reports. On Wednesday we have Fed's Waller speaking. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude with the US PCE report and Fed Chair Powell.
