The recent release of the NFP data, despite revealing concerning factors such as a higher unemployment rate and lower average weekly hours, hasn't had a significant impact on the Russell 2000. The labour market has remained resilient, albeit slightly looser, which might eventually result in lower inflation without causing severe harm to the economy.
Furthermore, the underperformance of the ISM Services PMI hasn't affected the market either. In fact, the sub-index indicating lower prices paid has sparked further speculation that core inflation could decrease without causing substantial damage.
Regarding the significant miss in Jobless Claims, it was taken with caution due to seasonal adjustments, and the Continuing Claims data showed more improvement. Overall, the market chose to focus on the positive aspects of the data rather than dwelling on the negative ones.
Russell 2000 Technical Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that after breaking out of the 3 month long range, the Russell 2000 rallied strongly towards the 1920 resistance zone as momentum buyers piled in aggressively. The move though was so violent that the price got overstretched fast as depicted by the distance from the blue 8 moving average and eventually we got a pullback. We may have one last spike up to the resistance zone or even a break higher, but that will be decided by the fundamental events this week.
Russell 2000 Technical Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that the Russell 2000 pulled back to the trendline and the 38.2% Fibonacci retracement level. It’s starting to look like the Russell 2000 bullish momentum is running out of gas, so the next days will be crucial for the buyers. The crossover of the moving averages is also a signal of weakening upside momentum and if we break below the Fibonacci level, we are likely to see a fall into the 1820 support.
Russell 2000 Technical Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that the buyers have two main choices here:
- Leaning on the 38.2% Fibonacci retracement level with a defined risk below it to target the 1920 resistance zone and an eventual breakout.
- Waiting for a break above the downward trendline to pile in and extend the rally into the 1920 resistance zone targeting a breakout.
The sellers, on the other hand, may want to wait for a break below the 38.2% Fibonacci retracement level to jump onboard and target the 1820 support first and a break lower afterwards.
This week holds numerous significant events for the Russell 2000. It all kicks off with the eagerly anticipated US CPI report scheduled for tomorrow. This report is expected to solidify the market's expectations for the upcoming FOMC rate decision, which is scheduled for the following day. Additionally, later in the week, we have another Jobless Claims report and the release of the University of Michigan consumer sentiment survey. The previous release of the survey had a considerable impact on the market due to a substantial surge in long-term inflation expectations.
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2023-06-12 09:08:00Z
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