Fundamental Overview
This week has been all about tariffs. On Monday we opened with a big gap lower as Trump followed through with his tariffs threats and imposed them on Canada, Mexico and China over the weekend.
As it’s been the case for previous tariffs actions though, the market started to cautiously fade the reaction in expectation of some kind of a deal. That’s exactly what happened as we got the news on Monday afternoon that the tariffs on Mexico were paused for 30 days after positive negotiations.
The market bounced back immediately, and the bulls started to build their positions with more conviction. There’s still the question with China but given that China’s response has been very soft and we haven’t got any negative news yet, the market is keeping with the optimism.
The focus now switched to the US NFP report tomorrow. The labour market data throughout January has been good, so we might see an overall good NFP report as well. The focus remains on inflation for the Fed, so even if we get a strong NFP, it shouldn’t change the Fed’s stance and two rate cuts by the end of the year will continue to remain the baseline.
Russell 2000 Technical Analysis – Daily Timeframe
On the daily chart, we can see that the Russell 2000 opened with a gap lower, but the buyers piled in around the trendline to fade the move and position for a rally into new highs. The price is now trading near the 2337 resistance. This is where we can expect the sellers to step in with a defined risk above the level to position for a pullback into the trendline. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into a new all-time high.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, there’s not much we can add here as the sellers will look for a pullback into the major trendline, while the buyers will target a break above the resistance. If we do get a pullback though, the first support zone is standing around the 2290 level.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe. The buyers will likely continue to lean on the trendline to push into new highs, while the sellers will look for a break lower to get more conviction for a pullback into the 2290 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the US NFP report.
