Over the weekend there were reports of a deal being finalized between the U.S. and Iran to end the war. This came after weeks of conflicting reports between the two countries. However, the Prime Minister of Pakistan confirmed that both sides had come to an agreement. Since the source was from a third party (Pakistan) who had been mediating the situation, it provided more legitimacy of an actual deal this time. Oil fell on the news and finished just above $81/barrel, which was a loss of about 4.5% for the day.
The markets saw a sharp rally on this news and tech led the way with the Nasdaq closing up 3.07%. The S&P also added 1.65% for the day while the Russell 2000 closed up 0.72%. This was actually near the lows of the day for the Russell as we got a rotation back into tech and out of small caps after they had been outperforming over the last couple of weeks. Yields were down significantly in the morning but climbed back with the 10 year finishing near the highs of the day which likely contributed to the underperformance in small caps. With today's big rally, the VIX fell another 8.4% to close at $16.20.
The Nasdaq had a really strong finish near the highs of the day and it broke and closed above its prior primary uptrend resistance which starts a new uptrend for it. It's unlikely that it opens above its new primary uptrend (white) tomorrow as that level will be around 27,125 which is about 1.7% away from today's close of 26,683. So assuming we don't get another huge gap up tomorrow, that 27,125 level would act as resistance on a rally attempt. There would also be more resistance at about 26,985 from its prior downtrend (yellow) which is just over 1% away. If it did gap above this level, then it would act as support, but it's also unlikely given where it closed today. For now, those will be the only two levels of resistance to watch. Even though it's unlikely to gap above those levels, it doesn't mean its bearish, as price action was very bullish today. It's likely that a new trend is simply started and we'll need to wait to see how it closes for the direction of that new trend.
If there's a pullback, the first support to watch will be from its prior uptrend (blue) at 26,575-26,600. If that doesn't hold, then the last support in play for tomorrow will be at about 26,400 from its prior downtrend (yellow) which it gapped over today.
The S&P gapped up to its prior primary uptrend resistance and quickly broke through this morning. It also closed well above it which starts a new daily uptrend for it. Now it's in a similar boat as the Nasdaq as it will need to gap up to open above its new primary uptrend (white). However, in the S&P's case it will be at about 7,577-7,580 tomorrow which would only require about a 0.3%-0.4% gap up to get there which is doable. So if it does get that gap up then the 7,577-7,580 level will act as support on a pullback. After that it won't have any daily resistances in play, but the next resistance level I'd watch would be at 7,645-7,650 which is its primary weekly uptrend resistance (see the last weekly update for reference).
If the S&P fails to get the gap above the 7,577-7,580 area tomorrow morning, then that level will act as resistance on a rally attempt. On a pullback, the first support to watch will be from its prior uptrend (blue) at 7,532-7,533. If that doesn't hold, the next support on a larger sell-off would be from its prior downtrend (yellow) would be at about 7,336. However that is nearly 3% away and is extremely unlikely to actually be tested.
The Russell 2000 had a very weak finish near the lows of the day today, however it didn't break through any trends so nothing changes from a technical perspective. For tomorrow, the only resistance it has right now is from its primary uptrend (white) which will be at about 3,070. But, this level is about 3.5% away and is unlikely to get tested.
On a pullback, its primary uptrend (white) will also likely be the only support level to watch at about 2,943. If that doesn't hold, it will have more support around 2,862 from its prior downtrend (yellow). However that is also about 3.5% away so it's also unlikely that this level gets tested. The more likely scenario if it does break through its primary uptrend, that a new trend will simply be started but we'll have to wait to see how it closes first.
