Russell 2000 Technical Analysis

Yesterday,
the Russell 2000 opened lower and finished the day negative following another
hot US CPI report.
This has pushed rate cuts expectations further out with the market now pricing
in less rate cuts than the Fed’s dot plot. The Treasury yields skyrocketed
across the board putting some pressure on the stock market. Now the market
might even think that the economy is still doing great, and the Fed is not
going to hike anyway, but there are now good reasons to see a bigger correction
to the downside, so the bulls should be extra careful.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 has been diverging with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. We broke below the key trendline yesterday
which should be a confirmation for a reversal and a move towards the base of
the divergent formation around the 1920 support. Before
that though, the sellers will need to see the price breaking below the key 2020
support zone to increase the bearish bets into the 1920 support. The buyers, on
the other hand, will likely step in here with a defined risk below the support
to position for a rally back into the highs.

Russell 2000
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
break below the trendline and the 61.8% Fibonacci retracement level as
the market gapped lower following the US CPI release. The bias has now turned
more bearish, but the buyers still have the 2020 support zone as the last line
of defence.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that from
a risk management perspective, the sellers will have a much better risk to
reward setup around the downward trendline where they will also find the confluence of the
61.8% Fibonacci retracement level and the 4-hour 21 moving average. The
buyers, on the other hand, will want to see the price breaking higher to
invalidate the bearish setup and increase the bullish bets into the cycle
highs.

Upcoming
Events

Today we get the US PPI report and the latest 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.