The markets staged a late rally back this week after strong earnings from MU and the delayed November CPI report came in cooler than expected as well as a resurgence in the AI trade on Friday. Next week is a short trading week with the markets closing early (1pm Eastern) on Wednesday for Christmas Eve and they will be closed all day on Thursday for Christmas with regular hours resuming on Friday, December 26th. So expect some light volume holiday trading. But next week is also when the 'Santa Rally' phenomenon comes into play, with Wednesday being the start of it.
There was some technical damage done with last week's pullback, even with the rally back into the end of the week. IWM and SPY both closed below their weekly uptrend supports while QQQ finished the strongest and managed to close back above its primary weekly uptrend support, putting in a failed breakdown. Starting with IWM, which had the weakest weekly close, still starts a new weekly uptrend. However, there is risk of opening below that new uptrend support which is at about $251.50. Given that IWM closed at $250.79, it would need to gap up on Monday above that $251.50 area to remain in the new uptrend. Otherwise, that level will be resistance. It's still possible that it breaks above that $251.50 area even if it opens below it, but downside risk increases when there's an open below support. If it closes the week below $251.50 then a new weekly downtrend would start going into 2026.
QQQ finished the strongest and reclaimed its weekly uptrend support which started a new uptrend for it as well. But there's also risk of it opening below this support again on Monday if there's no gap up above the $618.25 area. If we open below that, it becomes resistance. If that happens, the next support level to watch would be at about $605.50 from the new weekly uptrend that was started. Meanwhile if it gaps or breaks above $618.25 the next level of resistance will be at about $627.50 from its prior (purple) downtrend which is still valid for now.
Lastly for SPY, similar to IWM, it closed below its previous uptrend support but still starts a new weekly uptrend. That new uptrend support is around $674.50 so there's very little risk of it gapping below it given that it closed at $680.59. The prior uptrend which it closed below last week will now act as resistance which will be at about $691.50 next week.
