Russell 2000: l’indices des small/mid caps se stabilise

The Russell 2000 is stabilizing at key support at 2200 points, but employment and inflation numbers will be crucial in the near term.

Jobs and inflation numbers will be crucial for Wall Street in the short term

The Russell 2000 has been stable for more than two weeks after falling on Wednesday, December 18 due to a change in hawkish rhetoric from the Fed. The US small and mid-cap stock index is stabilizing between around 2,200 and 2,300 points, but employment data published at the end of the week or inflation data published next week could give direction to the market in the short term. .

The most positive scenario for the Russell 2000 would be in-line employment data and weaker-than-expected inflation data, as this would strengthen the prospects of a Fed rate cut for good reasons, namely disinflation (rather than recession). Conversely, employment figures too different from expectations and/or inflation figures stronger than expected would reinforce fears of even more hawkish rhetoric from the Fed and/or fuel fears of recession.

Russell 2000 daily price chart – key levels

The Russell 2000 return/risk couple becomes constructive again

Technically, the Russell 2000 is stabilizing on an important support at 2200 points which currently corresponds to the threshold of a correction (-10% compared to the one-year high). A drop below this threshold will likely require fundamental reasons like a darker economic outlook or more hawkish rhetoric from the Fed.

Note that this threshold is currently reinforced by the moving average at 200 sessions, a threshold also closely monitored by operators, and that participation indicators continue to be slightly oversold.

Despite the uncertainties, the return/risk ratio therefore tends to favor purchases of the Russell 2000 after a drop of around 10% since its peak at the end of November. Especially since the euphoria seems to have subsided and fears of inflation seem exaggerated (but it is difficult to prove these points). In the event of a sharp decline below 2200 points, the next major support to watch will be the summer 2024 low at around 2000 points, or 7% lower.