The markets were very volatile today as President Trump spoke at the World Economic Forum in Davos, Switzerland today. His remarks moved the markets in the morning after he said that he would not use force to acquire Greenland. Markets rallied in the morning on this news but the rally quickly faded and markets almost turned negative in the morning. Then later in the afternoon Trump said that he had formed a framework of a future deal for Greenland with the Secretary General of NATO, Mark Rutte. He also said that due to this agreement he would not be imposing the planned 10% tariffs that were scheduled for February 1st. Markets rallied sharply on this news in the afternoon and took out the opening highs. Small caps were the strongest again as they have been in recent weeks with the Russell 2000 closing up 2%. The Nasdaq followed with a gain of 1.36% and the S&P closed up 1.16%. The VIX also got crushed and finished at $16.90, down almost 16% for the day.
In yesterday's update I mentioned that the Nasdaq had started a new downtrend but that it was already at the the bottom of its range which set it up for a potential bounce. It did not retest the new downtrend support as it gapped up at the open and never took out yesterday's low. This morning I mentioned on X that the key resistance level to watch was at about 25,325 from its prior daily uptrend (purple) which would be resistance. It got rejected right around that level in the morning before the big fade in the markets where they almost went negative. It did end up breaking through it later in the afternoon after the tariffs were called off, but markets faded some into the close again and the Nasdaq ended up closing right at that 25,325 level (closed at 25,326.58). For now that prior uptrend still remains as valid support/resistance depending on whether it opens above or below it tomorrow. That level will be a little higher for tomorrow at about 25,340. If it gaps above this level tomorrow, then it will act as support. The next resistance level to watch would be from its current primary downtrend (white) which will be right around 25,600. Meanwhile its support from this same downtrend would be at about 24,860 if we were to get another big sell off. It didn't break through its primary trend today, so it doesn't start any new trends.
The S&P also gapped up and did not retest or break through its new primary support, so here as well no new trends will be started for tomorrow. It did also get the snap back rally to retest is prior uptrend resistance (purple) which it did not break through. So this uptrend still remains valid as well, and that resistance will be at 6,920 for tomorrow. If it gaps above 6,920 then it becomes support. After that, the next resistance to watch will be at about 6,982 from its primary trend (white). If we were to see another big sell off, then the support level to watch would be at 6,788 which is also from its primary trend and just below yesterday's low.
For the Russell 2000, it broke and closed above both of its prior uptrends making them no longer valid. It hit new all time highs today and closed at 2,698, which in yesterday's update I said would be the last resistance level to watch in the event of a snap back rally. It did break above it, putting in a new all time high of 2,703.75, and it closed just a hair above that 2,698 resistance. This starts a new daily uptrend for it going into tomorrow. Now there are a couple of things to watch out for with small caps here. Since it closed at 2,698.17, it will need to gap up tomorrow above the 2,701 level for that to be support (the uptrend that it broke today). If it fails to gap up tomorrow, then that level will remain as resistance. If that happens, then we could get a pullback to its new uptrend support that it started today (white) which will be at about 2,671 tomorrow. If it does gap up or break through 2,701, then the next daily resistance from its new uptrend will be at about 2,723. And that will also be right around the weekly resistance that I talked about over the weekend (see the weekly update) which will be at about 2,725-2,730. So this will be a big area to watch for the Russell 2000 and it could potentially set markets up for a rotation back into other underperforming areas like tech.
