Small caps caps led again today as the rest of the markets sold off with tech especially weak. IWM closed up 0.7% while QQQ closed down 1.07% and SPY also closed down 0.49% in what appears to be a continuation of a rotation into small caps. But even with the losses, QQQ and SPY did recover quite a bit off of the lows - especially SPY. As I mentioned yesterday, the VIX has been strong to start 2026 and it briefly broke above $18 today with a high of $18.10 and it was also in backwardation around the highs. However, with the bounce back in the markets, the VIX also faded and finished at $16.75 for a gain of 4.82%.
IWM did open below its primary daily uptrend support from yesterday before it rallied back to close above it. This gives it a failed breakdown on the daily. It also did not break through the $260 support that I mentioned in yesterday's update which is support from its prior (purple) uptrend, so this channel is still valid. With today's failed breakdown it starts yet another uptrend. Now the primary uptrend support from yesterday (yellow channel now) will be the first level to watch which will be at about $263.25 which is just above today's closing price of $263.19. It will be support if it opens above $263.25 and resistance if it opens below it tomorrow. After that, the next support level will be at about $261.70 from the new uptrend that it started today (white) while yesterday's retest support (purple) will also be support at about $261.50. The next resistance levels to watch will be at about $266.25 (purple) and $267.45 (white) with more at about $268.75 (yellow) - but this last resistance is pretty far for a one day move and it likely won't actually reach that level.
QQQ gapped and closed below its uptrend support from yesterday which still starts a new daily uptrend for it. Support from this new uptrend (white) will be right around $615 for tomorrow while resistance will be just above $624 from the uptrend that it opened below today (purple). With today's sell off, QQQ did break through weekly support. So there is some potential damage here on larger time frames if it doesn't recover into end of week. We'll have to see whether it closes above or below that weekly support level which is just below $620.
SPY finally broke through its uptrend supports today that I mentioned in yesterday's update. It broke through both the retest support at $688.25 and its primary support at $686.75. But, it did rally back to close well above that $686.75 previous primary support which gives it a failed breakdown on the daily and starts a new uptrend for it again. Now on a retest, the $687.60 area will be the first support to watch (purple) while its new uptrend will be support at about $686.80. The new uptrend that it started is much narrower and resistance from it will be around $700 over the next few days if it does work its way back up to the top of this new range. Now SPY also broke below its weekly support which was around $688.50-$688.75. So just like with QQQ, we'll have to see whether it closes above or below it by the end of the week.
