Thursday's Market Minute: Russell Futures Lagging Index Peers As Rally Stalls

Russell 2000 futures saw a slowdown in momentum this past week after price surged 10.5% in only 10 trading days since the end of May. The jump up took the price above several major moving averages, such as the 21-, 63-, and 252-day Exponential Moving Averages – all of which are now tilted upward, which suggests improvement in trend. However, the /RTY failed to break above the March highs and has since drifted back below the 1,900 level.

One important aspect of the chart is that unlike the S&P 500 and Nasdaq-100 futures, the Russell has not enjoyed a breakout into new yearly highs. Rather, the /RTY has been trading in a triangular pattern after hitting lows near 1,640 last June and highs near 2,033 last August. Since then, we’ve seen two trendlines steadily converging toward each other, but the /RTY could be struggling to push its way back up to the top of the pattern this time. Trendlines become more significant the more times they are tested and the longer they are in play, so a move beyond either of these two long-term lines could result in a breakout.

Keep a close watch on the Relative Strength Index (RSI) as well. This indicator measures momentum of price, and can offer clues in range-bound markets. Traders may be on the lookout for an overbought or oversold reading, especially if price is near a significant resistance or support level, for possible reversals.

If the /RTY starts to move downward, traders may look for the 21- and 252-day Exponential Moving Averages near 1,854 and 1,850, respectively. The relative closeness of these two indicators could create a support zone where bulls would be willing to step in. To the upside, a strong close above the 1,900 level likely would represent a good start to another leg of the current uptrend. Beyond that, look for potential resistance around March’s high close near 1,932.

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