The risk of two or more rate hikes from the Fed hasn’t weighed too much on the Russell 2000 as the index kept on finding strong bids despite the hawkish FOMC stance. A notable development recently was the miss in the ISM Manufacturing PMI where we saw contraction on all components. This is something that happens only in recessions, but the market took it with a pinch of salt given that soft data has been giving false signals for a long time while the real economy remained resilient.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 bounced on the 1820 support zone and rallied back strongly into the 1920 resistance. The buyers once again couldn’t break above the resistance zone and the price started to fall. The moving averages are also threatening a crossover now and we can expect another selloff into the 1820 support.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the sellers stepped in again at the 1920 resistance with a defined risk above the zone and should now be targeting the 1820 support. The moving averages are crossed to the downside as the bearish momentum prevails. From a risk management perspective, the buyers would be better off waiting for the price to come back into the 1820 support and pile in there to target another breakout.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we also had a divergence with the MACD approaching the 1920 resistance which was a signal that the momentum was weakening and a pullback or reversal was in the cards. The price is now printing lower lows and lower highs and there’s no clear entry point for the sellers other than waiting for a pullback into the previous swing low at 1885, where they will also find the red 21 moving average, and position for new shorts into the 1820 support.
Upcoming Events
Today we have the US Jobless Claims and the ISM Services PMI on the agenda, while tomorrow we will finally see the latest NFP report. The market has been reacting positively to good data so we might expect the same if we get positive readings. On the other hand, misses to the forecasts may bring back recession fears and lead to some risk off sentiment.
