Soft landing vibes are still present in the market, although we have started to see some pullbacks here and there. In fact, after the omission in the US CPI report, last week’s economic data was still good US retail sales exceeds expectations for control group data and US Jobless Claims a decline near record lows, further confirming the strength of the labor market. The recent bearish behavior may just be profit taking or a defensive position ahead of the FOMC’s rate decision this Wednesday.

Russell 2000 Technical Analysis – Daily Time Frame

Russell 2000 daily

On the daily chart, we can see that since breaking the key resistance at 1920 it has now turned to support, the Russell 2000 has rallied to near the 2030 resistance. A clear break of this major range between the 1640 support and the 2030 resistance would open the door to a rally to all-time highs. This will not be an easy task for buyers as strong sellers are likely waiting for 2030 resistance for a big drop to 1640 support.

Russell 2000 Technical Analysis – 4 Hour Time Frame

Russell 2000 4 hours

On the 4-hour chart, we can see that the bullish momentum has started to fade as the Russell 2000 nears key resistance at 2030. In fact, we can see that the last stretch was higher diverging with
MACD which is generally a sign of fading momentum, often followed by pullbacks or reversals. In this case, the price broke below the trend line and the moving averages turned down, increasing the chances of a return back to the 1920 support.

Russell 2000 Technical Analysis – Time Frame 1 Hour

Russell 2000 1 hour

On the 1 hour chart we can see that we have a good level of support at 1965 and this is where buyers should pile in with a defined risk below to position themselves for another rally to resistance in 2030 and hopefully a breakout. Sellers, on the other hand, will want to see the price decline to pile up even more aggressively and extend the fall to the 1920 support.

Upcoming events

This week is packed with market-moving events. Starting today, all eyes will be on the US PMI. If the data beats expectations, we should see a rally, but if it falls short, we could experience a selloff. Going into Wednesday, the Fed is expected to raise interest rates by 25 bps to a range of 5.25-5.50%. This decision is already priced in, so it’s unlikely we’ll see permanent changes.

On Thursday, the focus will shift to the US Jobless Claims report. A positive result is likely to boost market sentiment, while disappointing numbers could lead to a bearish result. At the end of the week we will see the latest US PCE and ECI news. Investors and traders are hoping for softer numbers that would provide further confirmation of the soft landing scenario and this could be seen as a positive sign for the market.

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