Russell 2000 Technical Analysis – Bad data weighs on the market

Fundamental
Overview

The Russell 2000 has been
selling off pretty aggressively since Friday following a series of bad US data
releases. In fact, we got weak US Flash Services PMI, UMich final Consumer Sentiment and yesterday a weak US Consumer Confidence report.

The problem here is that
we’ve also got inflation expectations jumping to new highs in both the University
of Michigan and the Conference Board reports. The market might be fearing that
in case we get a slowdown, the Fed might not be fast enough in cutting rates
amid inflation remaining above target and uncomfortably high long-term
inflation expectations.

This is something to keep
in mind in light of the next NFP and CPI reports coming out before the March
FOMC decision where we will also get the updated SEP and Dot Plot. Hot data, especially
on the inflation side, could trigger a deeper correction.

Russell 2000
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Russell 2000 broke below the major trendline and extended the drop into the 2172
low as the sellers piled in more aggressively on the break. This is where we
can expect the dip-buyers stepping in with a defined risk below the low to
position for a rally back into the 2337 resistance.
The sellers, on the other hand, will look for a break lower to increase the
bearish bets into the 1993 level next.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, there’s
not much we can add here as the buyers will look for a bounce into the downward
trendline, while the sellers will look for a break lower to extend the selloff
into new lows.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that on an intraday basis, if we get a break above the most recent lower
high at 2195, we can expect the buyers to increase the bullish bets into the
2220 level next. The red lines define the average daily range for today.

Upcoming
Catalysts

Tomorrow we get the latest US Jobless Claims
figures, while on Friday we conclude the week with the US PCE data.

This article was written by Giuseppe Dellamotta at www.forexlive.com.