Russell 2000 Technical Analysis | Forexlive

The last week was incredible for the Russell 2000
with the index rallying for five consecutive trading days. The bulk of the
rally came after the FOMC rate decision where the Fed left interest rates unchanged and Fed
Chair Powell delivered less hawkish than expected remarks. The Russell
2000 then extended the gains into the weekend after the NFP report
missed forecasts and the ISM Services PMI came
lower than expected.

One may think that the stock market sees a soft
landing and the fall in Treasury yields is a good thing. Unfortunately,
Treasury yields fell likely because the bond market sees more weakness to come
in the next few months given the softening in the labour market. So, the rally
we’ve seen out of the disappointing data is likely to be misplaced and the
market might correct that soon.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 last week broke above the trendline and the resistance zone
around the 1720 level to extend the rally towards the next trendline around the
1780 level where we can also find the 50% Fibonacci retracement level
for confluence. This is
where the sellers are likely to step in with a defined risk above the trendline
to position for a drop back to the lows.

We can also notice that the price is overstretched
as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
bearish setup around the major trendline and we can notice that the price is
overstretched to the upside even on this timeframe. From a risk management
perspective, the buyers would be better off waiting for a pullback into the
1720 support zone where they will find the confluence with the 38.2% Fibonacci
retracement level and the blue 8 moving average.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see the
incredible rally since the fakeout of the 2022 low. We can also notice that on
this timeframe we have the red 21 moving average around the 1720 support zone
adding an extra layer of confluence for the buyers. A break below this support
would invalidate the bullish setup and give the sellers back control.

Upcoming
Events

This week is pretty empty on the data front with just
the US Jobless Claims on Thursday and the University of Michigan Consumer
Sentiment on Friday. The market is likely to focus on the past week events and
will be eager to see the US Jobless Claims on Thursday given the recent
weakness in the labour market data.