The soft-landing vibes are
still present in the market even if we started to see some pullbacks here and
there. In fact, following the miss in the US CPI report, the economic data last
week was still good with US Retail Sales beating expectations on the Control
Group data and the US Jobless Claims falling back near record lows
giving another confirmation of the strength of the labour market. The recent
bearishness may just be some profit taking or defensive positioning ahead of
the FOMC rate decision this Wednesday.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that since breaking
out of the key 1920 resistance now
turned support, the Russell 2000 rallied all the way up to almost reach the
2030 resistance. A clear breakout of this major range between the 1640 support
and 2030 resistance would open the door for a rally to all-time highs. It won’t
be an easy task for the buyers though as strong sellers are likely waiting at
the 2030 resistance to position for a big fall into the 1640 support.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that the bullish
momentum started to wane as the Russell 2000 approached the key 2030
resistance. In fact, we can see that the last leg higher was diverging with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the price has broken below the trendline, and the
moving averages, crossed
to the downside, which raises the chances of a retracement back into the 1920
support.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that we
have a good support level at 1965, and this is where the buyers should pile in
with a defined risk below the level to position for another rally into the 2030
resistance and hopefully a breakout. The sellers, on the other hand, will want
to see the price breaking lower to pile in even more aggressively and extend
the fall into the 1920 support.
Upcoming
Events
This week is packed with market-moving events. Kicking
off today, all eyes will be on the US PMIs. If the data beats expectations, we should
see a rally, but if it falls short, we could experience a selloff. Moving ahead
to Wednesday, the Fed is expected to raise interest rates by 25 bps to a range
of 5.25-5.50%. This decision is already priced in, so it’s unlikely that we’ll
see sustained moves out of it.
On Thursday, the focus will shift to the US
Jobless Claims report. A positive outcome is likely to bolster the market’s sentiment,
while disappointing figures could lead to a bearish outcome. Finally, to
conclude the week, we will see the latest US PCE and ECI reports. Investors and
traders are hoping for softer numbers, which would provide some more
confirmation of the soft-landing scenario, and that could be seen as a positive
sign for the market.
See also the video below: