Last week, the Russell 2000 finished on a positive note as the lack of bearish catalysts kept the market supported. Today, the futures market opened higher following the good PCE report last Friday when the market was closed for holidays. Therefore, we can expect to see a positive gap at the open. Overall, the path of least resistance remains to the upside with the main two risks for the bullish sentiment being a reacceleration in inflation leading to a hawkish Fed or a hard landing.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 last week 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. We can expect the sellers to step in around these levels to fade the positive gap at the open and position for a drop back into the 2020 support. The buyers, on the other hand, will likely take advantage of a pullback to position for new highs.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a much better risk to reward setup around the trendline, although we will need to see some key breaks on the lower timeframe to start looking at those levels. The sellers, on the other hand, will want to see the price breaking below the 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 is diverging with the MACD. 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 minor trendline. If the price were to pull back, the buyers will likely lean on the trendline to position for new highs with a better risk to reward setup.
Upcoming Events
This week we get the release of many key economic data. We begin today with the US ISM Manufacturing PMI. Tomorrow, we have the US Job Openings. On Wednesday, we get the US ADP and the US ISM Services PMI data. On Thursday, we will see the latest US Jobless Claims figures, while on Friday we conclude with the US NFP report.
