Yesterday, the Fed left interest rates unchanged at
5.25-5.50% as expected but revised its outlook on the more hawkish side. In
fact, the Fed not only sees another rate hike by the end of the year but also
much less rate cuts in 2024 as they revised it from 4.6% seen in June to 5.1%
now. The macroeconomic projections were also revised higher indicating a
resilient economy. In the press conference Fed Chair Powell
reaffirmed their data dependency and the need to move carefully as they
approach the terminal rate. One thing that caught everyone by surprise is when
asked if he would call the soft landing a baseline expectation now, Powell said “No, I would not do that”.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 sold off yesterday following the FOMC meeting and the price is now
threatening a key breakout of the support zone.
This is where the buyers should step in with a defined risk below the zone to
position for a rally back into the 1920 resistance. The sellers, on the other
hand, will want to see the price breaking through the support to pile in even
more aggressively and target the 1720 level.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that the trend was
already bearish as the price kept printing lower lows and lower highs into the
support zone with the moving averages also
being crossed to the downside. If the buyers manage to defend the support and
we get a pullback, the sellers will lean on the downward trendline to
position for another selloff and ultimately the breakout.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that we
have a divergence with
the MACD right
at the support zone. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we already got a pullback
into the minor trendline where the price got rejected and sold off into the
support. In fact, the price will need to break above the minor trendline to
confirm a reversal and open the door for a rally into the major trendline and
the 1870 resistance. For now, the Russell 2000 remains in a “sell on rallies”
mode.
Upcoming
Events
The week is drawing to a
close, but we still have a couple of key economic releases ahead. Today, the main event will be the US Jobless Claims
report as the labour market data remains very important for the Fed and the
market. Tomorrow, we will see the latest US PMIs data which is expected to be
market moving.