Yesterday, the Russell 2000 finished the day positive as the lack of bearish catalysts continues to support the market. In fact, the path of least resistance remains to the upside as growth and employment stay resilient, and the Fed continues to signal three rate cuts this year even if inflation reaccelerates a bit.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 rallied back to the cycle high around the 2115 level. We can also 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 where we can expect the sellers to step in with a defined risk above the cycle high to position for a drop back into the 2020 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
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 into the moving average where the buyers stepped in for a rally back into the cycle highs.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher is diverging with the MACD right at the cycle high. This should give the sellers a bit more confidence for a move lower as it could be a signal at least for a pullback into the trendline. If the price were to pull back, the buyers will likely lean on the trendline to position for a break above the cycle high with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 2020 support.
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