Daily March E-mini Russell 2000 Index

E-mini Russell 2000 Index (TF) Futures Analysis – January 23, 2013

The March E-mini Russell 2000 stopped short of the psychological 900.00 level on Tuesday after posting a late session surge. Trading was extremely light in the overnight market and the trading range was tight as the lack of solid economic news overnight kept investors on the sidelines. Furthermore, traders may be sitting on their hands ahead of the Apple (AAPL) earnings report which will be released later today.

The E-mini Russell 2000 index is made up of small caps stocks which are speculative by nature. Therefore, the index tends to be more sensitive to bullish and bearish news. This tends to cause periodic spikes in the market. In addition, volatility could be high at times under certain trading conditions. Although the index has been rising along with the larger-cap indices, any hesitation in those indices or shifts in sentiment may be exaggerated in the Russell.

Daily March E-mini Russell 2000 Index
Daily March E-mini Russell 2000 Index

Volume is down and there have been signs of increased put option activity which could mean the index is setting up for a reversal to the downside coupled with increased volatility. If you missed the rally, continue to monitor the index for a counter-trend reversal. This could pay-off if investors decide that the index is overbought.

Technically, since the index is at multi-year highs, there is no true resistance. 900.00 may be a psychological resistance level but this has to be proven. The best proof of a top in a trending market is a closing price reversal top. It may show up on the intraday charts first or it may be revealed on the daily chart. Since it is usually a reliable signal, it is worth waiting for. It is also better than continuously feeding this index by trying to pick a top. In other words, wait for a signal then pounce on it.

Looking at the chart, the uptrending Gann angle from the 823.10 bottom is the timing line. This angle is at 883.10 today. Since the main trend is up, there may be a technical bounce on the first test, but if this angle fails then look out to the downside.

Just look at the chart and you can see a lot of space between the two angles. One is at 823.10 and the other is at 853.10. Throw in the retracement zone at 861.25 to 852.25 and you can see that by waiting for the appropriate sell signal, a trader has the potential for a big pay-off. 

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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