Russell 2000: Squeeze Potential Builds

With uncertainty surrounding U.S. trade policy about to be resolved and price signals turning bullish, the ingredients for a squeeze in Russell 2000 futures are now in place.

Unlike other stock indices with far larger constituents, U.S. small caps have lagged this week’s rebound—potentially due to recession concerns, which wouldn’t help unprofitable cyclical firms tied to the broader economy.

However, while fundamentals point to downside risks, recent price signals have been more constructive. Monday’s hammer candle formed after a reversal from known support. While Tuesday’s doji signaled indecision, it still closed slightly higher, with strong volumes going through.

While signals like RSI (14) and MACD remain in negative territory, bearish momentum is starting to ebb, suggesting we may be in the early stages of a turn.

Those considering bullish positions could look to establish entries above 1994.8 with a stop beneath for protection. Rallies over the past two sessions have fizzled around 2040, making that an initial focal point. If sellers there are overrun, it could encourage others to join the move, looking for a retest of horizontal resistance at 2132.5.

Good luck!
DS