Last week the US data surprised to the upside with
the ISM Services PMI and Jobless Claims beating
expectations by a big margin. The market didn’t like the strong data as it
raises the chances of another rate hike in November. In fact, the Russell 2000
sold off following the PMI beat and deepened the losses after the beat in
Jobless Claims. The market seems to be trading on “good news is bad news” at
the moment, so watch out for the data this week.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 has been falling steadily from the key resistance at 1920
and it’s now getting close to the key 1820 support zone. This is where we can
expect the buyers to step in with a defined risk below the support to target
again a rally into the 1920 resistance. A break below the support would give
the sellers even more control and take the Russell 2000 into the 1720 level.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that the short term
trend remains clearly bearish as the price keeps on printing lower lows and
lower highs and the moving averages are
crossed to the downside. The price started to consolidate recently but we can
expect the sellers to lean on the red 21 moving average to position for another
selloff into the support zone. If the price breaks above the moving average,
the buyers are likely to pile in to extend the rally into the 1920 resistance.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that the
consolidation on the 1850 level led to a breakout of the downward trendline and
the price has been diverging with
the MACD for
some time. This is generally a sign of weakening momentum often followed by
pullbacks or reversals. In this case, the levels to watch will be the
boundaries of the orange box. A break to the upside should confirm a reversal
and lead to a rally into the 1920 resistance. On the other hand, a break to the
downside should see more sellers piling in and extend the drop into the 1820
support. More aggressive sellers may want to lean on the upper bound of the
range with a tight risk above the level to have a better risk to reward setup.
Upcoming
Events
This week is likely to be a volatile one given the
release of top tier economic indicators including the US CPI. In fact, on
Wednesday we get the US CPI report, which is expected to show an acceleration
in the headline inflation but a deceleration in the core measure. On Thursday,
we get the US PPI, Retail Sales and Jobless Claims data. Finally, we conclude
the week with the University of Michigan Consumer Sentiment report on Friday.