The markets returned from the long holiday weekend and started off to a weak note with futures selling off overnight which carried over to the market open. The Nasdaq and Russell 2000 were both down around 1.3% at today's lows while the S&P fell 0.9%. However, they all rallied back to finish flat with the Nasdaq closing up 0.14% and the S&P closing up 0.1% while the Russell 2000 finished unchanged. The VIX also reversed its early gains as it nearly hit $23 again but closed down 4.29% to finish at $20.29, although it does still remain in backwardation.
Today's rally back was pretty constructive as there is now potentially bullish divergence on daily time frames for both the Nasdaq and the S&P, but we do need to see some follow through tomorrow with a continued rally. The Nasdaq didn't break through its primary downtrend (white) today so it doesn't start any new trends for tomorrow. For now there are only a couple of levels to watch. Resistance on a bounce will be at about 22,680 and if it potentially gaps above that then it would be support. If we pull back again, the first support which is also from its primary downtrend will be at about 22,065 while its prior downtrend (purple) would also provide support at about 21,970.
The S&P also did not break through its primary downtrend (white) today so it doesn't start any new trends either. Resistance to watch on a bounce from this downtrend will be at 6,870 which it could potentially gap above as well in which case it would become support. On a pullback, its prior downtrend (purple) will be first support at about 6,760 followed by its primary downtrend (white) at 6,722. If that does not hold then there would be more support further away from its prior (yellow) downtrend at about 6,657.
Lastly, the Russell 2000 looks a bit different as it did break through its previous primary downtrend (see Friday's update) but rallied back to close above it which gives it another failed breakdown on the daily. But, this time it starts a new sideways trend for it and its prior uptrend are still valid so there will be a few levels to watch for tomorrow. The first support to watch will be at 2,630 from its prior uptrend (yellow) followed by 2,622 (blue) and lastly its new sideways trend it started today (white) which will be at 2,612. Meanwhile resistances on a rally will be at 2,670, also from its new sideways trend, and then 2,685 from its prior uptrend (purple).
