This week started like the last one with a broader
rally in the markets as the risk sentiment got supported by another lack of a
ground operation in Gaza over the weekend and the positive news about a couple
of hostages being released. Yesterday, on the other hand, we got the complete
reverse with the Russell 2000 opening lower and selling off for no apparent reason. The selloff accelerated in the
evening as the Israeli PM Netanyahu said
that they were preparing for a ground invasion. Will we see another selloff
into the weekend?
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 reached the 2022 lows around the 1650 support. This is
a crucial level where the buyers are likely to step in with a defined risk
below the support to position for a rally back to the highs. The sellers, on
the other hand, will want to see the price continue lower to increase the
bearish bets and start eyeing the 1500 level.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that we have a divergence with the
MACD right at
this crucial support zone. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, if we do get a bounce, the
sellers will have a much better risk to reward setup around the 1700 level
where we can find the confluence with the
trendline, the Fibonacci retracement levels
and the red 21 moving average.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that we
have a divergence on this timeframe as well. The risk to reward for the sellers
at these levels is certainly worse than if the price was around the 1700 level.
The fundamentals are not in favour of a rally, so if we do get one it very well
could be a great opportunity for the sellers to enter at even better prices.
Upcoming
Events
Today, we will see the US Jobless Claims data with
the market likely focusing on the Continuing Claims figures as they’ve been
recently showing some softness. The market may not like bad data given the
fragile risk sentiment. Tomorrow, we will get the US PCE report, which is not
expected to change anything for the Fed at this point in time.