Despite
good economic data like lower core inflation, stable jobless claims, lower
inflation expectations and strong consumer spending that support the
soft-landing narrative, the Russell 2000 just keeps on falling with very
shallow pullbacks. One of the main reasons might be the non-stop rally in long
term yields and real yields as it makes financial conditions tighter ultimately
weighing on the stock market. The good economic data might also be interpreted
as bad news because inflation might remain higher for longer requiring more
tightening from the Fed. There’s no easy answer at the moment, so the
technicals should be more helpful.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 has eventually broken the key 1920 support zone and
extended the selloff towards the next key support at 1820. The price at the
moment is a bit overstretched as we can see by the distance from the blue 8 moving average.
Generally, we can see the price entering a consolidation or pulling back into
the moving average before the next move. In this case, we might get a retest of
the broken support now turned resistance.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that we have a very
strong resistance now around the 1900 level as we can find the previous support
turned resistance, the trendline, the Fibonacci retracement levels
and the red 21 moving average. This is where we should see the sellers stepping
in with a defined risk above the resistance to target the 1820 support. The
buyers, on the other hand, will want to see the price breaking above the
resistance to get the conviction to target the 2020 level again.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see more
closely the bearish setup and the possible rally into the trendline. A lot will
depend on today’s economic data, so keep an eye on that.
Upcoming
Events
The only top tier economic indicator left
is the US Jobless Claims report
scheduled for today. The market has been weak in the past days even in the face
of good data, so we might be at a point where bad data causes recessionary
fears and good data leads to higher rates expectations. It’s possible that the
market is more likely to react positively to data that it’s not too cold nor
too hot, so big deviations might be bearish either way.