Prospects for RUSSELL 2000:
- Russell 2000 wins as the market continues to be risk averse
- Although the index of small caps in the tank may rise further in the coming days, in the medium term the maps may have a withdrawal.
- Slower economic growth and the prospect of higher corporate taxes could worsen sentiment and affect low-capital companies
Last week I wrote about how Russell 2000 approached someone’s land near 2260, the center of the trading area, the price of which has been trapped since February. In the following days, the index stabbed and climbed decisively above that region, increasing Fedi’s terrible prejudice At the Jackson Hole Symposium and some appeals to small businesses after their underperformance over the past few months.
After the rise, Russell in 2000 there may be some gas in the tank so that it can rise further and retest its all-time high of 2367 in the coming days. However, the buying momentum around this important technical resistance is likely to diminish with increasing negative risks and seasonal weakness.
One of the main threats to domestic people Russell 2000 is a slowdown in economic growth due to the cooling of household consumption as a result of the delta option (eg the Atlanta Federal Reserve reduced its GDP estimate for the third quarter to 3.7%, compared to 5.3% in its GDPNow model yesterday). Although new cases of coronavirus appear to have peaked, most hospital admissions and deaths are not expected to decline until the end of September.
Given that hospitalization and deaths are a more pronounced effect Confidence in consumer sentiment as new cases may fall further this month. Of course, this can further reduce consumption, as people reduce their leisure time. Needless to say, this scenario is a significant headwind for small businesses.
Last but not least, we also have the legislative risk associated with equities: the prospect of higher taxes. When Congress returns from summer break in mid-September, Democrats will immediately begin inter-party negotiations to draft their “$ 3.5 trillion human infrastructure package.” The bill, which could pass conciliation without any Republican vote, is likely to raise the corporate tax rate from 21% to 25%, or at worst 28%, to fund some of the social spending contained in the legislation. As investors wake up to the possibility of undermining tax reform, market sentiment may shift to risk reduction overnight and cause significant setbacks. Wall Street.
Focusing on the state of the art, the first resistance appears in the 2367 region (record high). Should price over it we saw movement 2500. On the other hand, as Russell 2000 improves the lower level, support arrives at 2260/2245, after which we have a 200-day moving average, followed by a channel lower limit of 2120.
RUSSELL 2000 TECHNICAL TABLE
EDUCATIONAL INSTRUMENTS FOR TRADE
– Written by DailyFX market strategist Diego Colman