E-mini Russell 2000 Index (TF) Futures Analysis – January 31, 2013

Pressure from the large cap indices is fueling overnight weakness in the March E-mini Russell 2000 Index. This action started on Wednesday when the Russell failed to make a new move high, breaking the correlation with the S&P 500 and NASDAQ-100. This divergence sets up potentially bearish trading conditions.

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

Technically, the March E-mini Russell 2000 Index broke through a long-term uptrending Gann angle at 907.10 today. This is the first sign of weakness since late December. One of the next downside targets is a pair of uptrending Gann angles at 865.10 and 864.10.

Based on the short-term range of 823.10 to 907.40, the retracement zone at 865.25 to 855.30 is also a key target. On the upside, 899.40 is resistance today. If the market is indeed turning lower then this price should stop the rally. A trade through 907.40 will negate this potentially bearish chart pattern. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 30, 2013

Despite the current uptrend, the March E-mini Russell 2000 index appears to be tiring. This morning it is testing an uptrending Gann angle from the 823.10 bottom. This angle is at 903.10. A trade through this angle should trigger the start of a near-term break.

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

The daily chart indicates that there is plenty of room to the downside. Based on the short-term range of 823.10 to 907.40, the retracement zone at 865.30 to 855.30 is the next likely downside target.

Trading volume could be light today because of the Fed meeting. Activity could pick up in the afternoon. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 29, 2013

Traders are looking for the March E-mini Russell 2000 Index to open lower on Tuesday. Lower demand for higher risk assets is helping to keep a lid on the upside price movement. Today, investors will be given the opportunity to react to U.S. housing and consumer confidence data. Housing is expected to improve while consumer confidence may show a sharp drop. Ford (F) and Amazon (AMZN) are the stocks to watch today.

The reaction to the reports may be short-lived, however, since the Fed begins a two-day policy meeting and on Friday, the U.S. announces its latest jobs data. The Fed is expected to keep its loose monetary policy in the hopes of stimulating the economy.

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

Technically, the main Gann angle to watch is 899.10. This long-term angle has controlled the direction of the market since late December. A break through this angle will be a strong sign that sentiment is turning weaker.

The daily chart indicates that there is plenty to room to the downside if traders can sustain the move under the uptrending Gann angle. Based on the short-term range of 823.10 to 907.20, the next major downside target is a retracement zone at 865.20 to 855.20. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 28, 2013

The March E-mini Russel 2000 index reached a new high overnight, leading to the call for a steady-to-higher opening. Like the other indices, the Russel l is in an uptrend. Although the index has been trending higher, the rally hasn’t been “lights out”. The steady climb is beginning to raise questions about the buying power behind the move.

Technically, the only indicator to watch is the uptrending Gann angle at 895.10. The market has held above this angle for 18 trading days. A break through this angle is likely to be the first sign of an impending correction.

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

Traders should pay close attention to the action around this angle since the daily chart indicates there is plenty of room to the downside. Based on the current short-term range of 823.10 to 904.90, there is the possibility of a near-term break to 864.00 – 854.40.

Watch for a higher-high, lower-close to give investors an excuse to take profits. This should trigger the break. Until there is a definitive size though, trade the trend and don’t try to pick a top. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 25, 2013

The March E-mini Russell 2000 Index inched a little higher overnight. The index reached a new high at 903.20, a tick better than yesterday’s high at 903.10. It’s often said that “a trend is motion is likely to remain in motion until acted upon by an outside force”. This means that we are likely to see another rally until the buying dries up or long investors decide that prices are too far above value.

Besides a handful of earnings reports, the Commerce Department releases new home sales data for December. Economists forecast a total of 385,000 annualized units, compared with 377,000 in November. It is not likely that a miss will help put in a top in the Russell, but it may give investors an excuse to pair positions.

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

The breakout rally in the Euro may translate into a “risk on” day which means we may see a rapid move to the upside. Since the market has been moving steadily higher, a spike move at this time could mean we’ve reached an overbought level, making the market ripe for a correction. Since the uptrend is strong, it doesn’t make sense to try to pick a top; however, an intraday closing price reversal top may be the best reason for aggressive speculative traders to explore the short side with limited risk.

Technically, the March E-mini Russell 2000 is getting close to testing a long-term uptrending Gann angle at 891.10. Since the main trend is up, buyers are likely to support a test of this angle. However, a break down through this angle could trigger the start of a sizable break if investors decide to liquidate with conviction. This could trigger the start of a break to at least 863.10 to 853.70 over the near-term. 

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. 

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. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 22, 2013

The March E-mini Russell 2000 futures contract rallied to 895.00 overnight before meeting resistance. Selling pressure took the market lower, putting the index in a position to post a closing price reversal by the end of the session today.

Earnings concerns as well as a stronger Japanese Yen are weighing on equity prices this morning. This trend is likely to continue shortly after the opening.

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

Technically, the first downside target is 883.10. A failure to hold this angle could trigger a sharp break. Based on the main range of 823.10 to 895.00, the next downside target is the retracement zone at 859.10 to 850.60. Another uptrending Gann angle is at 853.10, making 853.10 to 850.60 a key support cluster.

The Russell 2000 follows small-cap stocks. Today the pressure is on the large cap stocks so the index may follow the bigger indices lower but not necessarily with the same magnitude. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 21, 2013

The March E-mini Russell 2000 futures contract reached a multi-year high overnight with very little follow-through. Today’s action is expected to be limited because of the holiday in the U.S. Cash markets are closed and electronic trading closes early so don’t expect much movement.

Looking ahead to the rest of the week, although conditions may be overbought due to the huge rally since the first of the year, as long as stocks are paying the best return, look for an underlying bid.

E-mini Russell 2000 Index
E-mini Russell 2000 Index

Concerns that politicians will turn the debt ceiling issue into a long debate could be limiting gains, but there are rumors circulating that the Republicans are going to offer the President a three-month deal to allow for more discussion.

Technically, major support is at 879.10. A failure to hold this angle could trigger a correction to 857.90. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 18, 2013

The March E-mini Russell 2000 futures contract surged to a new high on Thursday without much fanfare. This may be a sign of a tired market. Overnight there was no follow-through to the upside which leads one to believe that the rally may have been option-expiration related.

Near-term support is at 875.10. A break through this level will put a bearish spin on the index. From a weekly standpoint, a close under 878.10 will send out a bearish signal.

E-mini Russell 2000
E-mini Russell 2000

The inability to follow-through to the upside and the general sluggishness of the overnight trading action suggests an overbought market. Although this appears to be evident, the absence of a clear bearish signal is helping to maintain the upside bias.

Although the U.S. debt ceiling issue is a major concern, investors aren’t expressing the feeling of doom and gloom that they showed last month when the U.S. was debating the fiscal cliff. This feeling of complacency could turn around and bite traders next week, it there are signs that the debt issue is at an impasse. Until then enjoy the uptrend as long as the market continues to make higher tops and higher bottoms. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 17, 2013

Increased demand for higher risk assets is helping  boost small-cap stocks. Although the range has been narrow, the March E-mini Russell 2000 futures contract is called slightly better based on the overnight trade.

Daily E-mini Russell 2000
Daily E-mini Russell 2000

Shortly before the cash market opening, the Russell 2000 is poised to challenge the multi-year high made earlier in the week at 883.50. A move through this level is likely to trigger a sharp rally if there is volume behind it. Since the move will be based on momentum, there is no target at this time.

On the downside, uptrending Gann angle support is at 871.10. A break through this level will conviction should trigger the start of a meaningful correction. The next likely downside target is a retracement zone at 853.30 to 847.20. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 16, 2013

The March E-mini Russell 2000 soared late in the session on Tuesday to post a new multi-year high at 883.50. Short-covering was most likely the reason for the rally as bullish traders took advantage of thin trading conditions. Volume is down so investors aren’t putting much emphasis on the move.

E-mini Russell 2000
E-mini Russell 2000

Technically, uptrending Gann angle support is at 867.10. This is the first potential upside target. Since the main trend is up, buyers are likely to show up on the first test of this level. The chart indicates that a break though this angle could trigger a sharp move.

Based on the 823.10 to 883.50 range, a key retracement zone has been established at 853.30 to 846.20. This is the ultimate downside target should sellers gain control of the market. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 15, 2013

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.

E-mini Russell 2000
E-mini Russell 2000

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. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 14, 2013

Two days of sideways trading action suggests the March E-mini Russell 2000 is poised for a near-term sell-off. Overbought conditions and profit-taking ahead of the debt ceiling debate may be contributing to the overnight weakness.

The chart indicates there is room to the downside. Traders should look for an early test of an uptrending Gann angle at 859.10. Since the main trend is up, expect a technical bounce on the first test.

Daily March Russell 2000
Daily March Russell 2000

Based on the short-term range of 823.10 to 882.50, expectations are for an eventual break into a retracement zone at 852.80 to 845.80. The main trend is not expected to turn down. The breaks should be corrective in nature and set up the next buying opportunities. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 11, 2013

Unlike the other indices, the March E-mini Russell 2000 did not follow-through to the upside in the overnight session. This could be a sign that investors are shorting the index in anticipation of a sell-off. Often investors use the Russell 2000 as a hedge against long positions in the other major indices.

E-mini Russell 2000 Chart
E-mini Russell 2000 Chart

Technically, the index crossed over to the weak side of an uptrending Gann angle at 887.10. The index will have to regain this angle in order to generate the upside momentum we saw yesterday. The inability to hold the steep uptrending angle typically leads to a move to the next angle. This target is 855.10.

Prior to yesterday’s breakout, the Russell consolidated. This makes 868.10 to 867.70 a major support area. A break through this zone is likely to trigger an acceleration to the downside. On the upside there isn’t a clear target, but traders should note that the index is vulnerable to a closing price reversal top on the daily chart. A close under 873.70 will reverse the week, setting up the Russell  2000 for a possible sell-off next week. 

E-mini Russell 2000 Index (TF) Futures Analysis – January 10, 2013

Greater demand for higher risk assets triggered an upside breakout in the E-mini Russell 2000 futures contract. Momentum is driving this market today so there is no solid upside target at this time. Typically, a rally driven by momentum and short-covering will move higher until the weakest short is taken out.

Technically the index is straddling an uptrending Gann angle at 879.10. This angle is controlling the strength and direction of the market. It may even act as a pivot price at times until the market establishes its value.

Daily E-mini Russell 2000 Chart
Daily E-mini Russell 2000 Chart

A sustained break under 879.10 will be the first sign of weakness. A trade through 868.10 will turn the minor trend to down. Traders should also look for an acceleration to the downside if 867.70 is violated.

If the market closes under 879.10 and can attract sustained selling pressure then traders should brace for a possible move to 851.10 over the near-term.

In summary, traders are likely to press the upside early in the session since this seems to be the way of least resistance. Since the market is being driven by greater demand for higher risk assets, the index should continue to move higher as long as this demand can be sustained. If the rally is all short-covering with little or no fresh buying then it is not likely to last, setting up the index for a possible reversal to the downside.