Tuesday's Market Minute: Russell Poised For New Highs?

Russell 2000 futures are pushing back above the key 2300 level after a solid 1.57% gain yesterday and are once again within striking distance of the all-time highs at 2366. The 2300 mark has been a frequent point of resistance during the 2021 trading year, as the small-cap index has often recently found itself in a range between this level and roughly 2125 to the downside. Now, traders must contend with the classic question of whether to get in a long position for the potential upside breakout, or make a short play with the expectation that the range-bound trade will continue. This question becomes even more important for the broader market, as the /RTY has been the leader to the upside in recent week, and a breakdown could spell weakness on the horizon for the other three major equity indices.

For weeks, the Russell’s major moving averages were all converging near each other in a relatively narrow price range. But now, two important things are happening: first, the 21-day Exponential Moving Average is starting to pull away from the others to the upside, suggesting short-term strength; second, many of the common moving averages themselves are starting to trend upward. The MACD shows bullish momentum building while RSI continues to make new short-term highs with price, while the ADX shows a low reading near 14, suggesting weak or no trend directionality. Watch for the ADX to start rising from a trough to lend credence to a price move in either direction.

However, the Russell still has been largely unable to a make a significant move away from the yearly Linear Regression 50% channel’s lower line for more than a month, which is currently near 2295. If the move upward fails, watch for stabilization at the yearly Volume Profile Point of Control near 2235. If small-caps take off, a likely point to watch for a stall is at the yearly Linear Regression Line near 2415.

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