Yesterday, the Russell 2000 extended the drop into new lows despite a lack of bearish catalysts. In fact, we had pretty much a down day for most markets with selloffs in the US Dollar, Treasury yields and some commodities. On the geopolitical front, not much has changed as the Israeli retaliation continues to be delayed and it’s not even sure if they will strike at all now.
On the macro side, the market has priced out almost all the rate cuts in 2024 as it expects just one cut later in the year. On the data front, we don’t have much to work on in the next couple of weeks except the PCE, which the Fed has already indicated to be slightly higher but mostly unchanged.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 broke through the key support zone around the 2020 level and extended the selloff into the 1950 level. The 1920 support looks inevitable at this point. The buyers will likely step in there with a defined risk below the support to position for a rally back into the 2020 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the next support at 1820.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a much better risk to reward setup around the downward trendline where they will also find the confluence of the 50% Fibonacci retracement level and the red 21 moving average. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for a rally into a new cycle high.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor black trendline which has been defining the current downward momentum with the red 21 moving average acting as dynamic resistance. We can also notice that the price is starting to diverge with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the sellers will likely lean on the trendline again to position for the final push into the 1920 support. The buyers, on the other hand, will want to see the price breaking higher to start targeting the major trendline around the 2020 resistance.
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