Russell 2000 and 50DMA: The Mix for Explosive Moves

With fresh data on US GDP and inflation arriving over the next two days, Russell 2000 futures look interesting as they close in on the key 50DMA.

The index is testing minor resistance at 2312.8 in thin Asian trade, with the 50DMA not far above at 2323.5. The focus on the latter comes from its tendency to spark explosive moves once the price either breaks or bounces from it.

Over this week and last, bulls have repeatedly probed the level only to be thwarted by bears, painting a picture of a stalemate that may be eventually be resolved in a similar manner. The string of doji candles since only reinforces this view.

If we see a sustained break above the 50DMA, longs could be established above it with a stop either below it or at 2312.8 for protection. 2386.6—which has acted as both support and resistance previously—is one potential target. A break above that would put a retest of record highs on the table.

Alternatively, another rejection at the 50DMA would be a strong signal that a bearish bias may be warranted.

Mixed signals are emerging from momentum indicators, with MACD pushing higher while RSI (14) sits in a minor downtrend, though it’s threatening to shift higher.

Upcoming economic data screens as important for small-cap US stocks given their cyclical characteristics and reliance on capital markets for funding.

Good luck
DS