Yesterday, the US CPI report
came basically in line with expectations as the market was already expecting
higher energy prices to push up the August inflation readings. The Core
measure, which is what the Fed is focused on, was in line with forecasts with
the monthly figure just a touch higher than expected. The core 3-month
annualised rate is now 2.4%, which is a good indicator for the Fed that their
policy is working well. Now, the question is whether the labour market softens
enough to bring inflation sustainably back to target without a recession. And
this is something that never happened in history.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 is approaching again the key 1820 support zone.
This is where we can expect the buyers to step in with a defined risk below the
zone to target a rally into the 1920 resistance area. The sellers, on the other
hand, will want to see the price to finally break through the support to pile
in and extend the fall into the 1720 level.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see more closely the
setup near the support zone with the price likely to bounce on the first try as
the buyers will be piling in. The big picture remains uncertain and that’s what
is keeping the Russell 2000 in a range. We will need some big fundamental
catalyst to finally break out of this big range.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that this
latest leg lower is diverging with
the MACD right
when it’s falling into the key support. This is generally a sign of weakening
momentum often followed by pullbacks or reversals. In this case, once the price
bounces on the support, we might see a pullback into the 1865 swing high level,
but if the price continues higher, then the reversal will be confirmed, and the
price will go back to the 1920 resistance.
Upcoming
Events
Today is likely to be a volatile one given that we
are going to see lots of top tier economic indicators released at the same
time. In order of importance, we will get the US Jobless Claims, Retail Sales
and PPI data. The September FOMC meeting is already a done deal as the market
is pricing a 97% probability of a pause, so the data is going to influence the
November and December expectations. Tomorrow, we conclude the week with the
University of Michigan Consumer Sentiment report.