Sage Investment Club

The recent economic data gave the Russell 2000 and the market reason to break out of the Christmas holidays range and the bullish
sentiment looks to be strong.

The beat in NFP numbers and the miss in AHE
(Average Hourly Earnings) made the market to expect a goldilocks scenario:
strong labour market without wage inflation. Moreover, the big miss in ISM
Services PMI
made the market to expect the Fed to stop hiking
soon with an earlier than expected cutting cycle on the horizon.

Yesterday, the US
came out
as expected, and what caught the market’s attention was another beat in Jobless
data, which showed a resilient and strong labour
. This
should actually be bearish as it would keep the Fed on its track of hiking to
5% or more and then stay there for longer.

So, they may keep conditions
tight for too long causing an overtightening of financial conditions. But
the market is looking more at the goldilocks scenario at the moment
, and we
need to wait for it to start worrying about the above-mentioned risks before
switching to a more bearish bias.

In the
daily chart above, we can see how the price, after breaking out of the
Christmas holidays range, started a strong bullish run to the upside
targeting the
resistance zone at 1920.

A break
above that zone may open the doors for a run to the resistance at 2030. A
failure at the 1920 zone and bearish fundamentals would make the price to fall
back to possibly the support at 1650.

In the 1-hour chart above, we
can see the recent economic data and risk events that boosted the bullish
. The breakout started with the NFP and PMI data. The market then
leaned on the defensive side going into Fed
Chair Powell
speech, but since he didn’t offer anything
bearish, the market resumed its rally.

Finally, the CPI data in line
with expectations and the beat in Jobless Claims gave the market another reason
to keep the bullish momentum intact. The resistance at 1920 looks like the natural
target for the current uptrend.

Zooming in to the 15 minutes
chart, we can see the near term levels of interest. If the price stays above
the 1873 level the market should maintain the bullish bias
and target the
resistance at 1920. If the price breaks below the 1843 level, sellers should
regain control
and target the range breakout level at 1800. Between the
green and red lines the price would be in no man’s land and it shouldn’t offer
any trading opportunities

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