Russell 2000 Technical Analysis | Forexlive

Last Friday, the Russell 2000 rallied despite the ISM Manufacturing PMI missing
expectations and falling further into contraction. The market is still trading
based on rate cuts expectations as the trigger for the rally was a neutral Fed Chair Powell speech
where he didn’t push back against the market’s pricing. The market seems to be
all-in on the soft-landing trade and ignoring the weakening economic data,
especially on the labour market side. The sentiment is also getting a bit bubbly
right when things might really go south, so the buyers might want to be extra
cautious going forward.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 broke decisively through the key resistance zone
around the 1820 level. If the price continues higher, we can expect the sellers
to step in around the next 1920 resistance zone with a defined risk above the
level to position for a drop back into the previous resistance now turned support.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
higher diverged with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, from a risk management perspective, the buyers would
have a much better risk to reward setup around the trendline where
they would find the confluence with the
Fibonacci retracement levels
and the daily red 21 moving average.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action with the bounce on the minor trendline and the
strong parabolic move soon after. Such strong impulses usually reverse at least
some of the move, which is when the dip buyers pile in for a second wave. The
support levels should be the previous resistance turned support around the 1820
level and the major trendline around the 1780 level.

Upcoming
Events

This week we will see lots of US labour
market data culminating with the NFP release on Friday. Tomorrow, we have the
ISM Services PMI and the US Job Openings reports. On Wednesday, we will get the
US ADP data. On Thursday, it will be the time for the US Jobless Claims
figures, while on Friday we conclude the week with the NFP report.