Last Friday, the Russell 2000 ended the day positive following the US NFP report. In fact, the data beat expectations across the board showing once again that the labour market remains resilient without too much inflationary pressure as wage growth continues to ease. The focus will now switch towards the US CPI data on Wednesday as a hot report could change the Fed's strategy in the near term and delay the rate cuts further.
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 indeed got a pullback into the key trendline recently where the price bounced off of last Friday following the US NFP release. We can expect the buyers to step in around these levels with a defined risk below the low to position for a rally into a new cycle high. The sellers, on the other hand, will want to see the price breaking below the trendline and the 2020 support zone to increase the bearish bets into the 1920 support.
Russell 2000 Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we also have the 61.8% Fibonacci retracement level near the trendline for extra confluence that should give the buyers some more conviction to look for a bigger bounce from these levels.
Russell 2000 Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the bounce on the trendline last Friday. If the price were to break above the counter-trendline, we can expect the buyers to increase the bullish bets into a new cycle high. The sellers, on the other hand, will likely lean on the counter-trendline with a defined risk above it to position for a break below the major trendline with a better risk to reward setup.
Upcoming Events
This week is going to be a bit more tranquil on the data front with the US CPI being the main highlight. On Wednesday, we have the US CPI report which will likely decide if the Fed is going to delay rate cuts further. On Thursday, we get the US PPI and the latest US Jobless Claims figures. Finally, on Friday we conclude the week with the University of Michigan Consumer Sentiment survey.
