Yesterday, the Russell 2000 finished the day positive as a big drop in the price index in the ISM Services PMI turned the sentiment around and quelled some inflation fears. In fact, the market stayed under pressure since the hot ISM Manufacturing PMI on Monday as the increase in the price index renewed fears of a reacceleration in inflation. For now, the market might take a sigh of relief, but all eyes then will turn on the US CPI report next Wednesday.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 has been diverging with the MACD, which is generally a sign of weakening momentum often followed by pullbacks or reversals. We indeed got a pullback recently from the 2138 high with the price yesterday bouncing near the key trendline. We can expect the buyers to step in around these levels with a defined risk below the low to position for a rally back into the cycle high. The sellers, on the other hand, will want to see the price breaking below the 2020 support zone to increase the bearish bets into the 1920 support.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price bounced on the 61.8% Fibonacci retracement level near the trendline as the buyers piled in following the PMI report. If we get another move to the downside, the buyers will pile in again as they will have a strong support defined by the trendline and the 2020 zone.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the price yesterday getting rejected by the red 21 moving average into the close. If the price breaks above the 2081 level today, we can expect more buyers to pile in and increase the bullish momentum into the cycle high.
Upcoming Events
Today we will see the latest US Jobless Claims figures, while tomorrow we conclude the week with the US NFP report.
