Last week, the risk sentiment started on a positive
note at the beginning of the week due to the lack of a ground offensive in
Gaza. Unfortunately, things went south from Wednesday onwards as Israeli PM Netanyahu
delivered a speech where he said that they were preparing for a ground
invasion.
Moreover, the US Jobless Claims data on
Thursday showed another big miss in Continuing Claims, which might be an
indication that the labour market is weakening. On Friday, the risk sentiment
deteriorated further as market participants likely didn’t want to hold long
positions into the weekend, especially after early reports of the start of the
invasion.
Over the weekend we got reports of a ground offensive being indeed
underway. We will see how things will evolve during the week, but the market
will also have lots of important economic data to digest.
Russell 2000 Technical
Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can see that the Russell
2000 last Friday broke the 2022 low making a new 3-year low. It’s becoming
harder and harder for market participants to believe in a soft landing by just
watching at the performance of the index. Nevertheless, the sellers remain in
control for now, but from a risk management perspective, they would be better
off shorting from the trendline and the
red 21 moving average.
Russell 2000 Technical
Analysis – 4 hour Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can see that the sellers
might already pile in around these levels with a defined risk above the broken support turned resistance and
target new lower lows. If the price bounces back above the resistance though,
we can expect the sellers leaning on the resistance around the 1700 level where
we can find the confluence with the
trendline, the red 21 moving average and the Fibonacci retracement levels.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can see that we
have a divergence with
the MACD right
when the price is breaking out of the key support. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, if
we get a pullback, the sellers should lean on the minor trendline where they
will also find the confluence with the 50% Fibonacci retracement level and the
red 21 moving average. If the price breaks above the trendline though, we will
likely have a confirmation of a reversal and the buyers should pile in to
target a rally into the 1700 resistance.
Upcoming
Events
This week, we will get lots of tier one data points with
the US labour market and the FOMC decision in focus. Tomorrow, we have the US
Employment Cost Index and the Consumer Confidence report. On Wednesday, it will
be the time for the US ADP, the ISM Manufacturing PMI and the FOMC rate
decision. On Thursday we will get the US Jobless Claims data, while on Friday
we conclude the week with the US NFP report and the ISM Services PMI.