Last week, the risk sentiment started on a positive note at the beginning of the week due to the lack of a ground offensive in Gaza. Unfortunately, things went south from Wednesday onwards as Israeli PM Netanyahu delivered a speech where he said that they were preparing for a ground invasion.
Moreover, the US Jobless Claims data on Thursday showed another big miss in Continuing Claims, which might be an indication that the labour market is weakening. On Friday, the risk sentiment deteriorated further as market participants likely didn't want to hold long positions into the weekend, especially after early reports of the start of the invasion.
Over the weekend we got reports of a ground offensive being indeed underway. We will see how things will evolve during the week, but the market will also have lots of important economic data to digest.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 last Friday broke the 2022 low making a new 3-year low. It’s becoming harder and harder for market participants to believe in a soft landing by just watching at the performance of the index. Nevertheless, the sellers remain in control for now, but from a risk management perspective, they would be better off shorting from the trendline and the red 21 moving average.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the sellers might already pile in around these levels with a defined risk above the broken support turned resistance and target new lower lows. If the price bounces back above the resistance though, we can expect the sellers leaning on the resistance around the 1700 level where we can find the confluence with the trendline, the red 21 moving average and the Fibonacci retracement levels.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence with the MACD right when the price is breaking out of the key support. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, if we get a pullback, the sellers should lean on the minor trendline where they will also find the confluence with the 50% Fibonacci retracement level and the red 21 moving average. If the price breaks above the trendline though, we will likely have a confirmation of a reversal and the buyers should pile in to target a rally into the 1700 resistance.
Upcoming Events
This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Tomorrow, we have the US Employment Cost Index and the Consumer Confidence report. On Wednesday, it will be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate decision. On Thursday we will get the US Jobless Claims data, while on Friday we conclude the week with the US NFP report and the ISM Services PMI.