Russell 2000 Technical Analysis | Forexlive

The latest Non-Farm Payrolls (NFP) report has surpassed expectations,
continuing its impressive winning streak of 14. However, upon closer
examination, we find a few less positive aspects in the report. The
unemployment rate experienced its most significant increase since the pandemic,
rising from 3.4% to 3.7%. Additionally, there was a slight decline in average
workweek hours, which sometimes suggests the possibility of layoffs. Overall,
the report presented a mix of results, leaving room for various
interpretations.

The US ISM Services Purchasing Managers’
Index (PMI) came in
lower than anticipated at 50.3, just falling short of the contractionary
threshold. The employment sub-index indicated a contraction, while the prices
paid sub-index showed a notable decrease, returning to levels last seen in May
2020. As a result, the market further discounted the likelihood of additional
interest rate hikes by the Federal Reserve (Fed).

In recent days, the Reserve
Bank of Australia (RBA) and the Bank of Canada (BoC) surprised the markets with
rate hikes, which may have influenced risk sentiment. This development has
raised concerns that the Fed might follow a similar path. However, it appears
unlikely considering the Fed’s tendency to respond to market pricing, and we
should also keep in mind that the Consumer Price Index (CPI) report has not yet
been released.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, the Russell 2000 has finally
broken out of the 3-month-long range and momentum buyers jumped onboard
extending the rally towards the 1920 resistance zone. The
price is now getting overstretched right into the resistance area, so we might
see a pullback coming soon. The rally in regional bank stocks has also added
fuel to the rally as the Russell 2000 has been underperforming the other major
indices due to its higher exposure to the regional banking sector.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we now have a trendline that
should act as support for the buyers. The 1850 area looks strong as we find the
confluence of the
21 moving average, the
50%/61.8% Fibonacci retracement levels,
the previous swing high level as support and of course the trendline.

The buyers should lean on this zone with a defined
risk just below it and target the breakout of the 1920 resistance area. The
sellers, on the other hand, will want to see the Russell 2000 breaking below
the trendline to pile in and extend an eventual selloff towards the 1723
support.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
clearly the above mentioned setup with the moving averages at the moment
supporting the bullish momentum. Once we start to see those ebbing and cross to
the downside, then we can expect the pullback towards the 1850 area. If the
rally extends into the 1920 area, we should expect strong sellers waiting there
with a defined risk just above the zone to target the pullback towards the
trendline and eventually a breakdown.

The US Jobless Claims
report is an important event to keep an eye on today. However, it’s unlikely to have a major impact
on the market unless there are significant deviations from the expected
numbers:

• If
  the report beats expectations by a large margin, it could bring a sense of
  cautious optimism to the markets. A strong performance in the labour market,
  combined with a cooling trend, might indicate a smooth transition and
  potentially help bring inflation closer to the target. This could be
  seen as a positive sign.
• On
  the other hand, if the report sees a big miss to expectations, it could dampen
  market sentiment and potentially lead to a decline in the Russell 2000. Such a
  scenario might revive concerns about an economic recession, which could have
  negative consequences for market performance.