Yesterday, the Russell 2000 ended the day around the highs as the market continues to look through the beat in the US CPI report. As previously mentioned, the path of least resistance looks to be to the upside as long as growth remains pretty much stable, and the Fed doesn’t restart tightening. In the first case, the labour market will need to keep on being resilient, while in the second case, inflation should not start trending higher so much that the Fed is forced to change course.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 has been consolidating around the cycle highs as some weakness in the NFP report and the beat in the CPI data capped the upside. Nevertheless, the trend remains bullish as the price continues to print higher lows with the moving averages being crossed to the upside. We should keep finding dip-buyers as long as the price stays above the 2020 zone.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been trading inside a rising channel. From a risk management perspective, the buyers will have a good risk to reward setup around the lower bound of the channel where they will also find the 50% Fibonacci retracement level for confluence. The sellers, on the other hand, will want to see the price breaking below the bottom trendline to increase the bearish bets into the 1920 support.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher diverged with the MACD. This is generally a sign of weakening momentum often followed by pullbacks or reversals. The target for the pullback is usually the trendline or the most recent swing low. In this case, the price came near the swing low and bounced as the buyers stepped in to position for another rally. If we get another pullback, we can expect the buyers to lean around the bottom trendline. Alternatively, if the bullish momentum remains strong, we can expect the buyers to increase the bullish bets once the price breaks the recent high around the 2080 level.
Upcoming Events
Today we get the US PPI, the US Retail Sales and the US Jobless Claims figures. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment survey.
