The markets were a little weak today with small caps leading the way lower as the Russell 2000 closed down 1.15%. Tech was also weak with the Nasdaq losing 0.9%, though it was off of the lows after having been down almost 1.5%. Meanwhile the S&P closed lower by 0.49%. Despite the markets pulling back, the VIX was also weak as it finished down 1.05% and closed near the lows at $17.83. This was notable especially going into tomorrow's Fed rate decision and the big tech earnings reports after the close.
As I said in yesterday's update it was likely we would get a market pullback today, especially for small caps which was the laggard, as it was increasingly unlikely that the indexes would be able to continue to gap up enough to open above their primary uptrend supports. All of them failed to get that gap up which led to this technical pullback.
The Nasdaq closed below yesterday's primary uptrend support so it starts a new trend today which is still higher for now. There is some concern as there was another instance of bearish divergence on the daily for the Nasdaq which was confirmed with today's pullback. But price action remains bullish for now. The likely catalyst to take tech lower are the big tech earnings this week. But, for tomorrow its new primary uptrend (white) will be the first support level to watch at about 24,570. If that breaks, or there's another gap below it, then the last daily support in play would be from its prior uptrend (purple) at 24,260-24,270.
If we get a continuation of this rally tomorrow, the first resistance to watch will be from its prior uptrend (yellow) at 24,965 followed by its primary uptrend (white) at 24,990. If it breaks through its primary uptrend, there would be more resistance from its next uptrend (orange) at about 25,040. So there would be several resistances between 24,965-25,040 tomorrow on a rally attempt.
The S&P held its primary uptrend support (white) and its prior downtrend support (yellow) at that 7,109-7,113 range that I mentioned yesterday as the last supports to watch. It put in a low of 7,115.17 and since it didn't break through its primary uptrend support on the pullback today, it doesn't start any new ranges for tomorrow.
Its primary uptrend (white) will be the first level to watch again tomorrow and that will be support at about 7,130. The S&P closed at 7,138 today, but there is risk of a gap below 7,130 since it's so close. If that happens, that 7,130 level becomes resistance. However, as long there's no gap below it, it will remain as support on a pullback. If there's another rally attempt then the next resistance to watch will be from its prior uptrend (blue) at 7,169-7,170 and its next uptrend (purple) would be the last realistic level to be in play at 7,176-7,177.
Now if the S&P fails to open above its 7,130 primary uptrend support level, then it would be resistance on a rally attempt, and the next support to watch on a pullback will be at its prior downtrend (yellow) at 7,106. If there's a larger sell-off then the last support likely to be in play would be its next uptrend (blue - from the bottom end of that range) at 7,067-7,068.
The Russell 2000 failed to get the gap above 2,800 this morning which led to this pullback that I was talking about yesterday. It also broke through its downside target at 2,760 which invalidates that prior range. With the close below yesterday's primary uptrend, it also starts a new primary trend (white) for tomorrow which is a sideways range.
This new primary trend will be the only support level to watch at about 2,746 which was today's low as well. It will also be the first resistance from the upper end of the range at about 2,797 if we get a rally back. If it breaks through its primary trend at 2,797, then its next resistances will be at 2,820 (blue), 2,825 (yellow), and 2,831-2,832 (purple).
