Markets saw another sharp drop today after having recovered Tuesday's big sell-off. Today's selling pressure was led by small caps again as the Russell 2000 closed down 1.91% after falling nearly 3% at the lows. The S&P only closed down 0.56% while tech held up the best as the Nasdaq closed down just 0.26%. Software led again today after getting killed over the past couple of months. IGV (software ETF) gained 2.3% today and is now up 7.4% for the week. With today's sell-off the VIX jumped another 12%, but was off its highs. Late in the afternoon there was news that China was in talks with Iran to allow the safe passage of oil and gas through the Strait of Hormuz. This headline brought oil back down off its highs of $82.16 and also helped spur the market rally into the close. Tomorrow morning we will get the February Employment Situation report where Nonfarm payrolls are expected to increase by 50,000-60,000 and the unemployment rate to remain unchanged at 4.3% with a potential uptick to 4.4%.
Yesterday I noted that odds were we would see a pullback today because markets needed to see a big gap up in order to remain in their uptrends that I laid out in yesterday's update. We failed to get that gap up in markets this morning and confirmed the breakdown through those prior uptrends. The silver lining to today's sell-off is that the indexes did not break below Tuesday's lows, so they all put in higher lows which now starts new uptrends for them on daily time frames.
Starting with the Nasdaq, its new primary uptrend (white) support will be at 22,690-22,700 for tomorrow. It closed today at 22,748, but with the current volatility in the markets and with tomorrow's big jobs data it's very possible we could see another gap down below the 22,690-22,700 support. If that happens, then that level would be resistance on a retest. But, as long as we don't get that gap down below it, then it will act as support on a pullback. If it does open above this support then the next resistance to watch on a rally will be at about 22,965 from its prior uptrend (purple). If it can break through that, then its next resistance will be from the new uptrend (white) which is pretty far at about 23,270. If there is another gap down or break below the 22,690-22,700 level, then the next support to watch will be at about 22,525 from the downtrend it closed above today (yellow).
The S&P's new uptrend support (white) for tomorrow will be at about 6,818 which is below today's close of 6,830. But again, due to the high volatility and jobs data tomorrow morning there is risk of a gap below this new support. As long as it does open above it though, it will act as support on a pullback. The next resistance would also be from this new uptrend and it would be pretty far around 6,975-6,980. If it gaps below this new uptrend support at 6,818, or if it breaks down through it, then the next support to watch will be from its prior downtrend (purple) at 6,760.
The Russell 2000's new uptrend will be at about 2,581 for tomorrow. It closed at 2,585 today so it's at even greater risk of opening below that new support than the S&P and Nasdaq are since today's close wasn't far off from it. For now that is the only support level to watch as there is no other trend below it. We would have to wait and see how it closes tomorrow for the next trend if it does break through that support. Resistance on a rally will be from the top of this new uptrend (white) which is pretty far at 2,683.
