Last week, the Russell 2000 got under pressure amid geopolitical fears and a general risk off sentiment. The latest developments saw Israel retaliating against Iran but the latter downplaying the airstrikes. This episode might be behind our backs, although it’s worth to keep an eye on it if it were to become a concern again. On the macro side, the Fedspeak turned more hawkish, especially in the latter part of the week as the inflation progress looks to be stalled. Overall, the last week had plenty of bearish catalysts weighing on the market, so we will probably need some positive data on the inflation front this week to turn the sentiment around.
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 extending the selloff into new lows with the price now trading near the key 1920 support zone. The buyers will likely step in around these levels with a defined risk below the support to position for a rally into new highs. 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 increase the bullish bets into a new cycle high.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the recent price action formed what looks like a descending wedge. Moreover, the price is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. This might be a good signal for a reversal into the trendline. If the price were to break above the upper bound of the wedge, we can expect the buyers to pile in and target a rally into new highs. The sellers, on the other hand, will likely lean on the upper bound of the wedge to position for a drop into the 1920 support zone.
Upcoming Events
This week is a bit empty on the data front with just a few notable releases. We begin tomorrow with the US PMIs. On Thursday, we get the US Q1 GDP and the latest US Jobless Claims figures. On Friday, we conclude the week with the US PCE report.
