The June E-mini Russell 2000 is trading higher after posting a solid recovery following Monday’s sharp sell-off early in the trading session. The big news to watch today is the story out of Cyprus. Today, government officials are expected to vote on a newly proposed levy on bank deposits. Some investors feel that this “tax” could trigger a run on the bank or cause capital to leave the region in favor of safer currencies.
Trading conditions are quiet shortly ahead of the U.S. cash market opening, but we could see increased volatility if this becomes a news event driven day. Also on the fundamental agenda are two U.S. housing reports. Both housing starts and building permits are expected to show increases. Later in the day, the Fed starts a two-day meeting. This could be a market moving event tomorrow, depending on the language in their policy statement.
Technically, the main trend is still up. The daily chart does indicate, however, that there is plenty of room to the downside. Based on the longer-term range of 889.00 to 951.00, a wash-out to the downside could test a retracement zone at 920.00 to 912.50. I can’t emphasis enough that the upside will take care of itself if the bull market is to continue, it is the downside risk that could hurt you.
Regaining 949.00 will be a sign of strength and put the market on the path it was on prior to the breakdown on Monday.
Short-term traders should watch the action at 944.30 to 942.25. This retracement zone is likely to act like a pivot today. A sustained move under 942.25 is likely lead to additional selling pressure throughout the day. Holding above 944.30 indicates that buyers are still propping up prices.