Daily March E-mini Russell 2000 Index

E-mini Russell 2000 Index (TF) Futures Analysis – January 24, 2013

Following a sharp sell-off in Apple (AAPL) overnight, the March E-mini Russell 2000 Index futures contract is trading lower ahead of the opening.

The disappointing results from Apple as well as the threat of a nuclear weapons test by North Korea are two concerns for small-cap stock traders today. Stronger-than-expected economic data from China is helping to underpin the market, but today’s trading direction is likely to be determined by the movement in Apple.

If there is a follow-through to the downside during the day session then look for the Russell to feel pressure. If all the selling in Apple took place overnight and investors feel it has reached a value zone then a rally in the stock could single-handedly raise the major indices.

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

Volume and volatility remain relatively light suggesting that retail traders still haven’t returned to equities en masse despite the strong rally since the first of the year. One chart feature that could my eye was the divergence taking place between the Russell 2000 and the large-cap S&P and Dow. While the larger cap index and average were trading at new highs, the Russell failed to make a new high. This may be an early indication that the buying is drying up.

Technically, the March E-mini Russell 2000 is approaching an uptrending Gann angle. This angle has held since the index bottomed at 823.10 on December 31. It comes in at 887.10 today. Since the main trend is up, investors may buy the first test of this angle. If this angle fails to attract buyers then the index is likely to weaken. If momentum increases on the breakdown of this angle then it may start a normal correction.

Based on the range of 823.10 to 899.40, the first target zone is the 50 to 61.8 percent retracement zone at 861.30 to 852.30. Additionally, an uptrending Gann angle that pierces this zone at 855.10 could become an attractive support level for buyers.

The key today will be whether or not the markets shrug off the bad news from Apple. If there is a follow-through to the downside and the Russell breaks the support angle then look for investors to use this as an excuse to bailout. Keep in mind that I am looking for a correction and not necessarily a change in trend to down. This correction is designed to relieve the upside pressure and allow traders to buy equities at more favorable prices. 

Published by

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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