Russell 2000 Technical Analysis

Yesterday, the Russell 2000 extended the drop into
new lows despite a lack of bearish catalysts. In fact, we had pretty much a
down day for most markets with selloffs in the US Dollar, Treasury yields and
some commodities. On the geopolitical front, not much has changed as the
Israeli retaliation continues to be delayed and it’s not even sure if they will
strike at all now.

On the macro side, the market has priced out almost
all the rate cuts in 2024 as it expects just one cut later in the year. On the
data front, we don’t have much to work on in the next couple of weeks except
the PCE, which the Fed has already indicated to be slightly higher but mostly
unchanged.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 broke through the key support zone
around the 2020 level and extended the selloff into the 1950 level. The 1920
support looks inevitable at this point. The buyers will likely step in there
with a defined risk below the support to position for a rally back into the
2020 resistance. The sellers, on the other hand, will want to see the price
breaking lower to increase the bearish bets into the next support at 1820.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 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
50% Fibonacci retracement level
and the red 21 moving average. The
buyers, on the other hand, will want to see the price breaking higher to
invalidate the bearish setup and position for a rally into a new cycle high.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor black trendline which has been defining the current downward
momentum with the red 21 moving average acting as dynamic resistance. We can
also notice that the price is starting to diverge with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the sellers will likely lean on the trendline again to
position for the final push into the 1920 support. The buyers, on the other
hand, will want to see the price breaking higher to start targeting the major
trendline around the 2020 resistance.

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