Russell 2000 Technical Analysis – No support from the Fed

Fundamental Overview

The FOMC decision on Wednesday didn’t provide anything new. In fact, the Fed delivered on expectations with no surprises whatsoever. The central bank kept rates steady, reduced the QT pace, revised growth lower and inflation higher, and kept the dot plot mostly unchanged.

Fed Chair Powell acknowledged the current uncertainty around Trump’s policies and the inflation outlook but confirmed that the economy remains healthy, and the Fed is in a good position to wait for more clarity.

The only noteworthy comment was the dismissal of the rise in the long-term inflation expectations in the University of Michigan Consumer Sentiment survey as he labelled it as an outlier given that other metrics show long term expectations stable or even slightly lower.

The next key event is scheduled for Monday when we get the US Flash PMIs which coupled with the UMich inflation expectations triggered the growth scare last month.

Russell 2000 Technical Analysis – Daily Timeframe

On the daily chart, we can see that the Russell 2000 eventually bounced from the key support around the 1993 level. From a risk management perspective, the sellers will have a better risk to reward setup around the 2172 level to position for further downside, while the buyers will need the price to break above the major trendline to regain control and target a new cycle high.

Russell 2000 Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price broke below the upward trendline that was defining the bullish momentum on this timeframe. The sellers will likely pile in around these levels with a defined risk above the trendline to target a drop back into the 1993 support. The buyers, on the other hand, will want to see the price rising back above the trendline to position for a rally into the 2172 level next.

Russell 2000 Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that on an intraday basis, we have just broke below support zone around the 2075 level. This is where the sellers will likely step in with a defined risk above the support to position for a drop into the 1993 level next. The buyers, on the other hand, will want to see the price rising back above the support to start looking for a move into the major trendline. The red lines define the average daily range for today.