The Russell 2000 index retreated sharply on Tuesday as the fear and greed index stayed at the neutral point of 50. The index slipped by more than 1% and reached a low of $19,120, which was lower than this month’s high of $1,960.
The fear and greed index is an important tool that was developed by CNN Money to gauge sentiment among investors. It is made by combining several other indices such as the VIX, put and call options, safe-haven demand, and stock price breadth, among others.
In most cases, the index is a good predictor of stocks’ next major price action. For example, the Russell 2000 index has been in a strong recovery in the past few weeks. This performance mirrored that of other indices like the Dow Jones, Nasdaq 100, and S&P 500.
The rebound has happened as investors predict that the worst has already happened for American stocks. Also, investors are hoping that the Federal Reserve will slam its tightening brakes as data reveals that inflation may have peaked.
The Bureau of Labor Statistics (BLS) will publish the latest inflation numbers on Wednesday. Analysts expect the data to show that the country’s inflation eased from 9.1% to 8.7%. The Russell 2000 index will next react to the upcoming earnings of companies like Fox Corp, Wendy’s, Ballard, and Canterra Gold, among others.
The four-hour chart shows that the Russell 2000 index has been in a strong bullish trend. The rebound gained steam when the 25-day and 50-day moving averages made a bullish crossover. It then rose and reached a high of $1,956, which was the highest level since April 26th of this year.
The Russell index has retested the important support level at $1,918. Therefore, the most likely scenario is where the index resumes the bullish trend as bulls target the key resistance point at $2,000. This view will be confirmed if the fear and greed index moves to the greed level. A drop below the support at $1850 will invalidate the bullish view.
This post was last modified on Aug 10, 2022, 08:26 BST 08:26