The March E-mini Russell 2000 Index is trading flat this morning after yesterday’s U.S. market holiday. Last week, the index reached a new high for the year at 925.30. This move kept the uptrend intact but the lack of follow-through to the upside suggests that momentum is slowing.
Fundamentally, with earnings season coming to an end, investors are looking for a catalyst to take the market to the next level. Today it could be housing. This morning the National Association of Home Builders/Wells Fargo housing market index for February is expected to show a slight gain. This could give the market a boost.
Any rally triggered by a good housing number is likely to be short-lived because it appears that investors are starting to become concerned that the stock market is overextended and ripe for a correction. The catalyst behind a correction could be lower demand for higher risk assets or worries about the Federal government’s across the board spending cuts on March 1.
Technically, the main trend is up. A trade through 925.30 will resume the uptrend while a break through 891.10 will turn the main trend to down on the daily chart.
The key Gann angle to watch is at 917.10. This angle has given the market direction since January 31. A break through this angle will put the market in a weak position and will likely trigger a short-term correction. Based on the range of 891.10 to 925.30, the retracement zone at 908.20 to 904.10 is likely to be the first downside target.