Last week, we got some risk aversion in the market as the tensions in the Middle East intensified. In fact, going into the weekend the bearish momentum increased as ABC news reported that the Israeli military got the "green light" to move into Gaza whenever it was ready. Since we haven't seen any ground offence over the weekend, we might see a relief rally today.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 broke below a key support around the 1720 level as the bearish momentum going into the weekend intensified. This breakout opened the door for a fall back to the 2022 lows around the 1650 level. That’s where we can expect the buyers to step in more strongly with a defined risk below the lows to position for a rally back to the highs.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a descending triangle formed on the key support with the price eventually breaking downwards. The price got a bit overstretched to the downside though as depicted by the distance from the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we now have a strong support turned resistance around the 1720 level. If we get a relief rally today, the sellers are likely to lean on the resistance where we can also find the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average in what could end up being a classic “break and retest” pattern. The buyers, on the other hand, will want to see the price further breaking above the resistance to increase the bullish bets and target the major trendline around the 1800 level.
Upcoming Events
Tomorrow, we will get the US PMIs and the market might not like bad figures given the fragile risk sentiment. On Thursday, we will see the US Jobless Claims data with Continuing Claims recently showing some softness in the labour market. Finally, on Friday, we will get the US PCE report, which is not expected to change anything for the Fed at this time.
