The March E-mini Russell 2000 futures contract is poised for a sell-off after reaching a top last last week at 882.50 and consolidating for a few days. The lack of follow-through to the upside suggests overbought conditions are likely to trigger a near-term break but not necessarily a change in trend.
Concerns over the upcoming debt ceiling debate and a strong rally in the Yen are two reasons for the overnight weakness.
Technically, the Russel l is in a position to test an uptreneding Gann angle at 863.10 today. Since this angle is coming from an important bottom at 823.10, it could draw the attention of buyers on its initial test.
A failure to hold this angle could trigger an acceleration since the daily chart indicates there is plenty of room to the downside. Based on the near-term range of 823.10 to 882.50, the first target zone is a 50 to 61.8 percent area at 852.80 to 845.80.
A pair of slower moving Gann angles at 843.10 and 842.10 should provide additional support. Both of these angles could become important on Wednesday since they will cross the Fibonacci price at 845.80.
Looking at the long-term structure of the daily chart pattern, the angle from the November 15 bottom at 760.10 is most important. Although the swing chart indicates the main trend will not turn down until 823.10 is violated, a sustained move through the long-term Gann line will in effect mean that sentiment has shifted to the downside.