Russell 2000 Technical Analysis – Bad data weighs on the market

Fundamental Overview

The Russell 2000 has been selling off pretty aggressively since Friday following a series of bad US data releases. In fact, we got weak US Flash Services PMI, UMich final Consumer Sentiment and yesterday a weak US Consumer Confidence report.

The problem here is that we’ve also got inflation expectations jumping to new highs in both the University of Michigan and the Conference Board reports. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations.

This is something to keep in mind in light of the next NFP and CPI reports coming out before the March FOMC decision where we will also get the updated SEP and Dot Plot. Hot data, especially on the inflation side, could trigger a deeper correction.

Russell 2000 Technical Analysis – Daily Timeframe

On the daily chart, we can see that the Russell 2000 broke below the major trendline and extended the drop into the 2172 low as the sellers piled in more aggressively on the break. This is where we can expect the dip-buyers stepping in with a defined risk below the low to position for a rally back into the 2337 resistance. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 1993 level next.

Russell 2000 Technical Analysis – 4 hour Timeframe

On the 4 hour chart, there’s not much we can add here as the buyers will look for a bounce into the downward trendline, while the sellers will look for a break lower to extend the selloff into new lows.

Russell 2000 Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that on an intraday basis, if we get a break above the most recent lower high at 2195, we can expect the buyers to increase the bullish bets into the 2220 level next. The red lines define the average daily range for today.

Upcoming Catalysts

Tomorrow we get the latest US Jobless Claims figures, while on Friday we conclude the week with the US PCE data.