Fundamental
Overview
The Russell 2000 has been on an incredible run ever since the last US
CPI report as the index had its best 5 days streak in 24
years. The goldilocks data was the catalyst for a strong rotation from big
cap stocks into the small cap stocks, and the momentum was probably exacerbated
by hedge funds facing short squeezes on their small cap hedges as yields came
down.
More recently, we finally started to see a pullback which wasn’t triggered
by any negative catalyst, so it might be an opportunity to buy the dip as the
fundamentals strengthened the case for a soft landing.
Russell 2000
Technical Analysis – Daily Timeframe
Russell 2000 Daily
On the daily chart, we can
see that the Russell 2000 rejected a resistance
level at 2290 and started to pull back. The first support zone is around the 2170
level where we can find the confluence
of the previous swing high and the 38.2% Fibonacci
retracement level.
This is where we can expect
the buyers to step in with a defined risk below the support to position for a rally
into new highs. The sellers, on the other hand, will want to see the price
breaking lower to increase the bearish bets into the next support around the major
trendline.
Russell 2000 Technical Analysis – 4 hour
Timeframe
Russell 2000 4 hour
On the 4 hour chart, we can
see the US CPI marked on the chart as the catalyst that triggered the huge run
into the 2290 level. There’s not much else to glean from this timeframe as the
buyers will likely be waiting around the 2170 level, while the sellers will look
for a break lower to increase the bearish bets.
Russell 2000 Technical
Analysis – 1 hour Timeframe
Russell 2000 1 hour
On the 1 hour chart, we can
see that the price is getting closer to the support zone. If the price bounces
before reaching the support, we can expect the buyers to pile in on a break
above the most recent lower high at 2226. The red lines define the average daily range for today.