The markets pulled back today after a big 4 day rally with the Nasdaq lagging after AMD reported earnings which came in better than expected, but their capex spend was much higher than expected which took a toll on their stock and dragged other semiconductors down. AMD fell 7% while the SOXX and SMH lost 2% and 1%, respectively, and the Nasdaq lost 0.83%. Small caps also pulled back with the Russell 2000 closing down 0.59% while the S&P lost 0.17%. While they were up in the morning, they all essentially finished at the lows of day. In yesterday's update I noted that the VIX was strong, finishing up about 4% despite the big market rally. This can be a warning sign of a market pullback if there is continued strength in volatility while markets rally. However, we did not see that same strength in the VIX today as it closed down 4.2% as markets pulled back.
In yesterday's update I did mention that we would likely getting a pullback today as the Nasdaq would be unlikely to gap above its primary daily uptrend that it started yesterday due to the parabolic move. It did fail to get that gap up above it this morning, so it became resistance which it faded off of in the morning. As I noted yesterday, it's not necessarily bearish, the markets just needed a breather after the big rally.
For tomorrow, since the Nasdaq did close below yesterday's primary uptrend, it starts a new trend here. It did make a higher this morning before the reversal, so the new trend it starts today is still an uptrend. The first resistance to watch tomorrow will be its prior uptrend (blue) around 26,675 on another rally attempt. If it breaks through that, its new primary uptrend (white) would be the next resistance to watch right around 26,800.
If we get another pullback, the first support to watch will be from its prior uptrend (yellow) around 26,225 with its next support just below that from its primary uptrend (white) around 26,200. So this 26,200-26,225 area will be a big support to watch where those two trends intersect.
The S&P also got rejected right around the 7,800 level this morning which was the area I mentioned in yesterday's update to watch for a reversal at. As I said yesterday, it needed a breather and likely just needs to consolidate the big rally over the past few days in its new primary uptrend. It didn't break through that primary uptrend today so it doesn't start any new ranges for tomorrow.
For now the only resistance remains from its primary uptrend (white) which will be around 7,845 tomorrow. On a pullback, the first support to watch will be from its prior uptrend (blue) at 7,640-7,645 followed by its next sideways range (yellow) at about 7,585. If that doesn't hold, the last support would be from its primary uptrend (white) at 7,575. But again, it may not reach any of these supports as this just looks like a consolidation period rather than a bearish pullback or breakdown.
The Russell 2000 also remained within its primary uptrend that it started yesterday, so it doesn't start any new trends for tomorrow either. It primary uptrend (white) will be the first level to watch around 3,035 tomorrow. The Russell 2000 closed at 3,019 today, so it will need to gap up above the 3,035 area tomorrow in order to open above that primary uptrend. If it can get this gap up in the morning, then the 3,035 area will act as support and the only resistance to watch from there will be from the top of this same range around 3,110. This is pretty far away so it's unlikely to actually get there, even if it does get the gap above its primary uptrend.
The more likely scenario given where the Russell 2000 closed today is that it fails to get the gap above 3,035 in which case that area from its primary uptrend will become resistance on a rally attempt. From there on a pullback, its prior sideways range (orange) will be support at 2,984-2,985. This will likely be the only support that comes into play unless there's a big sell-off with some sort of catalyst as its next supports are at 2,940-2,945 from its prior downtrends (purple and blue).
