On Friday the Bureau of Labor Statistics (BLS) reported the consumer price index which rose 0.2% in January vs the expected increase of 0.3% which was cooler than expected. This pushed the rate sensitive small caps higher as the Russell 2000 gained 1.18% while the S&P was flat with a gain of 0.05%. Meanwhile tech continued to lag with the Nasdaq posting a loss of 0.22%. The mega caps were all weak again with the MAGS etf closing down nearly 1% which was led by Apple again as it lost another 2.27%. The VIX finished pretty flat but continues to remain elevated as it settled at $20.60.
Looking at Tuesday's levels (markets are closed on Monday for President's Day), the Nasdaq opened above its primary daily support on Friday but closed just below it. This starts a new downtrend for it going into Tuesday's session. Now it did close below its prior primary trend (now blue) but it was just a hair below it and that trend remains as valid support/resistance for now which will be at about 22,555 for Tuesday. The Nasdaq closed at 22,546 on Friday, so it's essentially a toss up whether it opens above or below this 22,555 level on Tuesday. If it opens above it, then that level will act as support again and if it opens below then it will be resistance.
From there, the next supports to watch will be at 22,225 from the new downtrend that it started on Friday (white) with its next support just below that at about 22,195 from its prior downtrend (purple). Resistance on a rally will be at about 22,840 which will also be from its new downtrend (white).
The S&P opened above its prior primary uptrend and broke below it, but it did manage to close just above it putting in a failed breakdown. However, since it did make a lower low it still starts a new downtrend so it looks very similar to the Nasdaq. The first key level to watch for the S&P on Tuesday will be from its prior uptrend that it broke below on Friday (orange) which will be at about 6,838 on Tuesday. Since it closed at 6,836 on Friday, it's also going to be a toss up for whether or not it opens above this 6,838 level. If it opens above, it's support and if it opens below then it will be resistance.
The next supports to watch will be from its prior downtrend (purple) at about 6,783 followed by its new downtrend (white) at about 6,765. If that support does not hold either, then the next one will be further away at about 6,700 from its prior downtrend (yellow). On the other hand if we do get a bounce then the next resistance to watch will be at about 6,913 from its new downtrend resistance (white).
The Russell 2000 had a strong finish on Friday and it did break just below its prior primary uptrend support, but closed well above it and it also put in a higher low. Now it starts a new uptrend on the daily with that failed breakdown. So for now small caps continue to look the best.
The first support to watch on Tuesday will be at about 2,622 which would be a retest of Friday's failed breakdown (orange). Its new, primary uptrend (white), would be support just below that at about 2,616. The first resistance to watch will be at about 2,675 from its prior uptrend (blue) which it did break through on Friday but it wasn't by much, so that level remains valid for now. If it can clear through this level significantly, then the next resistance would be from the top of this new uptrend (white) around 2,725 for Tuesday. But that would be a big one day move and it's unlikely to get there in a day. It would be around 2,730-2,745 for Wednesday-Friday.
