Large cap, mid-cap or small-cap, not amount of capitalization will be immune to the selling pressure that could hit the equity markets today. This means that growing bearish sentiment could pressure the March E-mini Russell 2000 throughout the trading session.
Weaker than expected economic data from China coupled with the possibility of a deepening recession in the Euro Zone means today is likely to be a “risk off’ trading session. Before you blame Asia and Europe for the sell-off, the across the board spending cuts by the Federal government are also contributing to the selling frenzy. Because of the uncertainty of the spending cuts, investors are paring positions rather than risk a worse than known outcome.
Technically, for a fourth time in five trading sessions, the Russell 2000 has broken through a pair of major uptrending Gann angles at 904.10 and 905.10. This is only helping to compound the problem.
The main trend is down on the daily chart and momentum appears to be building to the downside. The series of lower-tops and lower-bottoms indicates that selling pressure could take this index down to a major retracement zone at 878.20 to 865.20 over the near-term.
Look for the selling pressure to continue throughout the session but all bets are off if the Russell 2000 regains 905.10. A move through this level could turn the market higher.