Fundamental Overview
The Russell 2000 has been on an incredible run ever since the last US CPI report as the index had its best 5 days streak in 24 years. The goldilocks data was the catalyst for a strong rotation from big cap stocks into the small cap stocks, and the momentum was probably exacerbated by hedge funds facing short squeezes on their small cap hedges as yields came down.
More recently, we finally started to see a pullback which wasn’t triggered by any negative catalyst, so it might be an opportunity to buy the dip as the fundamentals strengthened the case for a soft landing.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 rejected a resistance level at 2290 and started to pull back. The first support zone is around the 2170 level where we can find the confluence of the previous swing high and the 38.2% Fibonacci retracement level.
This is where we can expect the buyers to step in 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 around the major trendline.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see the US CPI marked on the chart as the catalyst that triggered the huge run into the 2290 level. There’s not much else to glean from this timeframe as the buyers will likely be waiting around the 2170 level, while the sellers will look for a break lower to increase the bearish bets.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is getting closer to the support zone. If the price bounces before reaching the support, we can expect the buyers to pile in on a break above the most recent lower high at 2226. The red lines define the average daily range for today.
