Introduction
The daily chart of the RTY (Russell 2000) futures is currently in an uptrend that is not exactly strong but is an uptrend nonetheless. Let’s break down the chart’s technical analysis and the current market sentiment as we approach the US elections on November 5th.
Technical Analysis
The Russell 2000 index maintains its position within an ascending price channel, characterized by consistent higher highs and higher lows, demonstrating a clear upward trend. The index faces immediate resistance between 2,320 and 2,340, a zone that has repeatedly challenged upward momentum.
Technical support levels are currently structured in tiers, with minor support established between 2,200 and 2,220, coinciding with the 50-day Simple Moving Average (SMA). A more significant support level exists at 2,080, marking the channel’s lower boundary. The index’s position above the 50-day SMA reinforces the current support structure.
Recent price action shows the formation of higher highs and higher lows, though the latest peak registered marginally below the previous high. The index is lagging behind the bigger indexes, with its performance at 9%YTD vs. the S&P 500 at 19.8%. Will it catch up?
The primary trend indicators remain positive while trading above 2,080. A breach below 2,080 would signal a potential trend reversal. Conversely, a definitive move above the 2,320-2,340 resistance zone would confirm trend continuation. Let’s look at some trades and the overall market sentiment with regard to technical analysis.
High-Probability Trade Setups:
- 🐂📈 Breakout Trade Above Resistance (LONG): A breakout above the 2,320-2,340 resistance zone could trigger a continuation of the uptrend. This setup would be bullish, with targets toward the upper channel boundary and stops just below the breakout level.
- 🐂📈 Buying at Minor Support (LONG): Entering near the 2,200-2,220 support, close to the 50-day SMA, could be a strong entry point if price shows signs of consolidation or a bounce. This setup remains bullish with an expected target near channel resistance.
- 🐂↔️ Reversal from Major Support (Neutral to Bullish): In case of a significant pullback to the 2,080 level, this would provide a potential bullish entry point if the trend remains intact. This level is critical for maintaining the channel structure, and a breakdown here would shift the outlook to bearish.
Future Implications:
- Bull Case 🐂📈: If RTY breaks above the resistance zone, it shows increasing bullish momentum. A rally led by small-cap stocks may signal broader market optimism, which could gain traction in light of the election.
- Bear Case 🐻📉: A failure to break resistance or a sustained drop below the 50-day SMA and minor support around 2,200 would signal weakness. A drop to 2,080 or below could indicate a potential trend reversal to bearish sentiment.
Summary:
- Short-Term Outlook 🐂📈 (Bullish): Targeting a break above the 2,320-2,340 resistance zone.
- Medium-Term Outlook ↔️ (Cautiously Bullish): Bullish as long as the price holds above the 2,200 minor support and 50-day SMA.
- Long-Term Outlook 🐂📈 (Constructively Bullish): Within the channel, but a break below 2,080 would shift to bearish.
