Following a brief reprieve, the Russell 2000 index succumbed to selling pressure yesterday as it encountered significant resistance levels, halting the recent relief rally. The initial part of this week was relatively devoid of significant data releases, and the blackout period preceding the Federal Reserve’s policy meeting prevented any Fedspeak. Consequently, a relief rally ensued, fueled by weaker-than-expected economic data, which the market interpreted positively for inflation. However, concerns linger regarding the labor market. Starting today, the economic calendar gains momentum with the release of high-impact data as the new month heralds a flurry of reports.
On the daily chart, the Russell 2000 has retreated to the pivotal zone around the 2020 level, where sellers anticipate a potential break below the 1920 support. Buyers, on the other hand, seek to invalidate the bearish setup and propel prices higher. Shifting to the 4-hour chart, the price has encountered resistance from the downward trendline coinciding with the 50% retracement level, providing additional confirmation for sellers. Alternatively, a breakout above the trendline could signal a reversal of the downtrend, favoring buyers.
Zooming in on the 1-hour chart, we observe a closer view of the recent price action. The index has broken out of a trading range and is approaching the trendline. Sellers remain vigilant, monitoring the possibility of a spike above the trendline today, coinciding with the release of market-moving US economic data. Conversely, if the price decisively breaks above the trendline, it would strengthen the bullish case, potentially invalidating the bearish setup and leading to a reversal of the trend.
Today’s economic releases include the US Q1 GDP and the latest US Jobless Claims figures. The week concludes tomorrow with the publication of the US PCE report, which will provide further insights into the economy’s trajectory and potentially influence market sentiment.
