Yesterday, the Fed left interest rates unchanged at 5.25-5.50% as expected but revised its outlook on the more hawkish side. In fact, the Fed not only sees another rate hike by the end of the year but also much less rate cuts in 2024 as they revised it from 4.6% seen in June to 5.1% now. The macroeconomic projections were also revised higher indicating a resilient economy. In the press conference Fed Chair Powell reaffirmed their data dependency and the need to move carefully as they approach the terminal rate. One thing that caught everyone by surprise is when asked if he would call the soft landing a baseline expectation now, Powell said "No, I would not do that".
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 sold off yesterday following the FOMC meeting and the price is now threatening a key breakout of the support zone. This is where the buyers should step in with a defined risk below the zone to position for a rally back into the 1920 resistance. The sellers, on the other hand, will want to see the price breaking through the support to pile in even more aggressively and target the 1720 level.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the trend was already bearish as the price kept printing lower lows and lower highs into the support zone with the moving averages also being crossed to the downside. If the buyers manage to defend the support and we get a pullback, the sellers will lean on the downward trendline to position for another selloff and ultimately the breakout.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence with the MACD right at the support zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we already got a pullback into the minor trendline where the price got rejected and sold off into the support. In fact, the price will need to break above the minor trendline to confirm a reversal and open the door for a rally into the major trendline and the 1870 resistance. For now, the Russell 2000 remains in a “sell on rallies” mode.
Upcoming Events
The week is drawing to a close, but we still have a couple of key economic releases ahead. Today, the main event will be the US Jobless Claims report as the labour market data remains very important for the Fed and the market. Tomorrow, we will see the latest US PMIs data which is expected to be market moving.
