Russell 2000 Technical Analysis

Yesterday, the Russell 2000 ended the day around
the highs as the market continues to look through the beat in the US CPI report.
As previously mentioned, the path of least resistance looks to be to the upside
as long as growth remains pretty much stable, and the Fed doesn’t restart
tightening. In the first case, the labour market will need to keep on being
resilient, while in the second case, inflation should not start trending higher
so much that the Fed is forced to change course.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 has been consolidating around the cycle highs as some weakness in the NFP
report and the beat in the CPI data capped the upside. Nevertheless, the trend
remains bullish as the price continues to print higher lows with the moving averages being
crossed to the upside. We should keep finding dip-buyers as long as the price
stays above the 2020 zone.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price has
been trading inside a rising channel. From a risk management perspective, the
buyers will have a good risk to reward setup around the lower bound of the
channel where they will also find the 50% Fibonacci retracement level
for confluence. The
sellers, on the other hand, will want to see the price breaking below the
bottom trendline to
increase the bearish bets into the 1920 support.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
latest leg higher diverged with
the MACD. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. The target for the pullback is usually the trendline or the most
recent swing low. In this case, the price came near the swing low and bounced
as the buyers stepped in to position for another rally. If we get another
pullback, we can expect the buyers to lean around the bottom trendline.
Alternatively, if the bullish momentum remains strong, we can expect the buyers
to increase the bullish bets once the price breaks the recent high around the
2080 level.

Upcoming
Events

Today we get the US PPI, the US Retail Sales and the
US Jobless Claims figures. Tomorrow, we conclude the week with the University
of Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.