A recent upward correction on US indices has been halted in mid-August 2022. Taking a look at US small-cap Russell 2000 index (US2000) at a daily interval, we can see that the index climbed above the upper limit of market geometry at the turn of July and August but a subsequent upward move failed to gather momentum. Reversal occurred in the 2,035 pts area in mid-August and US2000 has been pulling back since. The focus now is on the 1,900 pts support area that houses previous price reactions, 38.2% retracement of the post-pandemic upward move as well as the upper limit of the aforementioned market geometry. A break below could hint that the downtrend is about to resume.
A key driver for US equities is the Fed's monetary policy. On one hand, recent data suggests that pace of tightening may ease going forward and it would be positive for equity markets. On the other hand, Fed's Kashkari said last night that Fed will only be able to relax on rate hikes once evidence of deceleration in price growth emerges. Powell's speech at Jackson Hole this Friday may shed some more light on the outlook.
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Source: xStation5
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