Russell 2000 Technical Analysis | Forexlive

On the
daily chart below, we can see that the Russell 2000 is still stuck in the range
between the 1723 support and 50% Fibonacci retracement level at
1820 as resistance. These types of markets are tricky for traders as they can
get chopped up within the range due to messy price action. The best strategy is
usually to just sit out and wait for a clear breakout.

But one
can also “play the range” by buying at support and selling at resistance, which
is something that worked wonders for the Russell 2000 lately. We saw some
weakness in the market in the past few days as traders were probably “selling
the fact” on the debt ceiling deal. Now that we got rid of that risk, we can
finally care more about the economic data going forward.

Russell 2000 Technical
Analysis

On the 4 hour chart below, we can see that the
Russell 2000 has bounced from a swing low support yesterday. The quick move
lower was caused by a big beat in US Job Openings as the
market odds for another hike in June rose to 70% in the aftermath of the
release. Soon after though, some Fed officials hinted to a pause
in June to buy time to see more data and the Russell 2000 erased the losses
from the prior report.

Today, we have the US Jobless Claims
and the ISM Manufacturing PMI, but given the Fed members’ comments yesterday,
good data may not cause big moves as the NFP report tomorrow and CPI next week
will be the decision makers. Bad data though may be both good and bad depending
on what the market cares more about. If it’s about less hikes, we should see a
rally, but if it’s about the recession, then we should see a selloff. The
technicals in this case will be helpful to determine where the market wants to
go.

On the 1
hour chart below, we can see that the Russell 2000 price action recently has
been pretty clean with the market respecting the support and resistance levels
perfectly. The bounce from the Fed officials’ comments is approaching the 1759
resistance. That’s where we can expect the sellers to pile in and target the
1723 support next. The buyers, on the other hand, will want to see the price to
break above the level to jump onboard and target first the 1775 resistance, and
upon another breakout, the 1791 level.

Tomorrow, all eyes will be on the US NFP report.
Good data accompanied by a beat in average hourly earnings should weaken the
Russell 2000 as the market might start to be concerned about a wage price
spiral. Good data with a miss in average hourly earnings should be the
best-case scenario for the Russell 2000 and take it to new highs.

Bad data should be just bad, but it wouldn’t be the
first time that we see the market rally on less rates hikes hopes and ignoring
the deterioration in the data, so keep an eye on the technicals to help you
navigate the price action.