This week started like the last one with a broader rally in the markets as the risk sentiment got supported by another lack of a ground operation in Gaza over the weekend and the positive news about a couple of hostages being released. Yesterday, on the other hand, we got the complete reverse with the Russell 2000 opening lower and selling off for no apparent reason. The selloff accelerated in the evening as the Israeli PM Netanyahu said that they were preparing for a ground invasion. Will we see another selloff into the weekend?
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 reached the 2022 lows around the 1650 support. This is a crucial level where the buyers are likely to step in with a defined risk below the support to position for a rally back to the highs. The sellers, on the other hand, will want to see the price continue lower to increase the bearish bets and start eyeing the 1500 level.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a divergence with the MACD right at this crucial support zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, if we do get a bounce, the sellers will have a much better risk to reward setup around the 1700 level where we can find the confluence with the trendline, the Fibonacci retracement levels and the red 21 moving average.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence on this timeframe as well. The risk to reward for the sellers at these levels is certainly worse than if the price was around the 1700 level. The fundamentals are not in favour of a rally, so if we do get one it very well could be a great opportunity for the sellers to enter at even better prices.
Upcoming Events
Today, we will see the US Jobless Claims data with the market likely focusing on the Continuing Claims figures as they’ve been recently showing some softness. The market may not like bad data given the fragile risk sentiment. Tomorrow, we will get the US PCE report, which is not expected to change anything for the Fed at this point in time.
