Last
Friday, the Russell 2000 surged to new highs despite a much weaker than
expected ISM
Manufacturing PMI. The market probably took it as good news because
it reduces the chances of the Fed eventually being forced to resume tightening.
In fact, the US Dollar and the Treasury yields fell across the board giving the
stock market a boost. The path of least resistance remains to the upside until
we start to see a deterioration in growth or the labour market cracks.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 has finally reached the cycle high and it’s now trying to extend the rally
above it. This is where we will likely find the sellers stepping in expecting
the double top to work
out. The buyers, on the other hand, will want to see the price continuing
higher to invalidate the bearish setup and increase the bullish bets into new
highs.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price has
been trading inside a rising channel. From a risk management perspective, the
buyers will have a much better risk to reward setup around the lower bound of
the channel. The sellers, on the other hand, will want to see the price
breaking below the bottom trendline to
increase the bearish bets into the 1920 support.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a minor trendline defining the current uptrend. We can also notice that we
have a divergence with
the MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see the price pulling back into the trendline
where we will also find the red 21 moving average for confluence. This
is where the buyers should step in with a defined risk below the trendline to
position for a rally into new highs. The sellers, on the other hand, will want
to see the price breaking lower to pile in and position for a drop into the
major bottom trendline around the 2010 level.

Upcoming
Events

This week we have lots of important events on the agenda
with the release of the US labour market data and the Fed Chair Powell
testifying to Congress. We begin tomorrow with the US ISM Services PMI. On
Wednesday, we have the US ADP, the US Job Openings and the Fed Chair Powell
speaking. On Thursday, we get the latest US Jobless Claims figures, while on
Friday we conclude the week with the US NFP report.