E-mini Russell 2000 Index Ends Week with Potentially Bearish Closing Price Reversal Top

June E-mini Russell 2000 Index futures posted a closing price reversal top on the weekly chart. If confirmed, this potentially bearish chart pattern could lead to the start of a two to three week break. The chart pattern will be confirmed on a break through 1059.50.

The selling pressure was triggered by the comments of a chorus of Fed officials who suggested the Fed could raise interest rates in April. The index consists of small cap stocks and these companies don’t like higher rates because they rely on financing to run their operations.

We could see some volatility next week on Tuesday when Fed Chair Janet Yellen gives a speech on the economy. On Friday, volatility is also expected with the release of the latest U.S. Non-Farm Payrolls report.

Technically, the main trend is up according to the weekly chart. The main range is 1195.60 to 945.20. Its retracement zone is 1070.40 to 1100.00. Last week, the index tested both levels before closing inside the zone.

Based on the close at 1074.90, the direction of the market this week is likely to be determined by trader reaction to the 50% level at 1070.40.

A sustained move under 1070.40 will indicate the presence of sellers. This could lead to a quick test of a price cluster formed by a downtrending angle at 1059.60 and last week’s low at 1059.50. This area is the trigger point for an acceleration to the downside into a steep uptrending angle at 1057.20.

Crossing to the weak side of the angle at 1059.60 will put the index in a bearish position. Taking out 1059.50 will confirm the closing price reversal top.

The steep uptrending angle at 1057.20 is also the trigger point for another acceleration to the downside. Taking out this angle could lead to a test of the short-term 50% level and main objective at 1022.40.

A sustained move over 1070.40 will indicate the presence of buyers. This may create enough upside momentum to trigger a retest of the closing price reversal top at 1099.60 and the Fib level at 1100.00. Taking out these levels will put the index in a bullish position.

Watch the price action and read the order flow at 1070.40 this week. I’d like to play the short side on a sustained move under this level and the long side on a sustained move above it.