Russell 2000 futures have been the breakout name of the four major equity indices this quarter. Small-cap futures are up more than 30% since the beginning of November and rocketed into all-time highs above the 2,000 level yesterday.
However, technical indicators may be pointing to a slowdown in this major push to the upside. The daily RSI suggests the /RTY contract may be overheating, given that it’s been in the overbought region above 70 since Dec. 3. This momentum indicator also started showing bearish divergence from price yesterday, meaning that price made new highs while the RSI didn’t, which is typically regarded as a warning sign.
Another thing to consider is the ADX, which measures trend strength, peaked on Dec. 18 and has been falling all week. The area between the 21-day Exponential Moving Average (near 1,917) and the Linear Regression 50% Channel upper line (near 1900) seems like a likely support zone if we see a pullback, but be careful if prices drop past the Dec. 21 low of 1,878.10. If Russell futures resume their race upward, watch for resistance at the daily two Standard Deviation Channel upper line currently around 2,114.
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