E-mini Russell 2000 Index (TF) Futures Technical Analysis – October 28, 2013 Forecast

The December E-mini Russell 2000 Index is called steady this morning after a pre-market rally through last week’s high at 1120.50 failed to attract fresh follow-through buying. Buyers may be a little hesitant at current price levels because of technically overbought conditions and this week’s Federal Open Market Committee announcement.

Although most traders believe the Fed is going to refrain from tapering its monetary stimulus at its October 30 meeting, there is still some uncertainty as to whether it will take a December tapering off the table. Leaving traders in limbo about December could trigger a short-term break into a value zone before the next rally begins. Taking December out of the equation now should be bullish for stocks because it will lift the uncertainty that could be causing the current labored rally.

Yes, since making a top at 1120.50 five days ago, the index has managed only a one-point high-to-high gain. This could be a sign that we are closer to a top then the next major breakout.

If conditions are overbought then the first sign of weakness today will be a break under a short-term uptrending Gann angle at 1115.20. Given the short-term range of 1103.20 to 1121.20, the next sign of weakness will be a trade through this range’s pivot price at 1112.20.

Under this price, the index could make a quick move into the last main bottom at 1103.20. A trade through this level could trigger an acceleration into a major uptrending Gann angle from the 1034.70 bottom at 1086.70 over the near-term.

Ultimately, based on the longer-term range of 1034.70 to 1121.20, the market should test the main retracement zone at 1078.00 to 1067.75. Although the main trend will be down on the daily chart when this zone is tested, the buying or profit-taking may be strong enough to trigger a short-term technical bounce.

Look for an early sideways trade today with investors deciding to make their move once they determine whether the selling is greater than the buying or the buying greater than the selling at the 1112.20 pivot price. If volume is too light to enable investors to trade with clarity then look for a sideways trade throughout the session.