Kevin Warsh delivered his speech at Jackson Hole yesterday morning and it gave off mixed feelings as he highlighted the strength of the economy but also warned about persistent inflation. Odds also shifted towards future rate hikes with the market currently pricing in a 25bps hike for September with another hike being priced in for December. The rate sensitive Russell 2000 was hit the hardest yesterday, closing down about 1.4%. Meanwhile the Nasdaq lost about 0.50% and the S&P lost 0.25%. However despite the weakness yesterday, the VIX remained suppressed. It hit a new low for the year during the early market rally and still closed lower by 0.50% at $14.43.
The Nasdaq did have a failed daily breakout yesterday but it made a higher high so it still starts a new daily uptrend for Monday. It was a weak finish near the lows yesterday so where it opens on Monday will be critical as it may open below this new primary uptrend (white) which will be support/resistance at about 26,465. That is above Friday's close of 26,402 so it will need to gap up on Monday to open back above this new uptrend. If it can get this gap up, then the 26,465 area will act as support on a pullback and the next resistance to watch will be from its prior uptrend (orange) at about 26,665 which will be a retest of Friday's failed breakout. If it can break through it, the last daily resistance to watch will be from its new primary uptrend (white) around 26,850.
If the Nasdaq fails to get the gap above its primary uptrend (white) at 26,465 on Monday then this level will act as resistance on a rally attempt. From there on a pullback, the next support to watch will be at about 26,190 (orange). If that doesn't hold, it will have more support from its prior downtrends at 26,080 (blue) and then 26,000 (yellow).
The S&P also had a failed breakout yesterday, but still starts a new uptrend as well as it made a higher high. This was a bigger failed breakout than the Nasdaq's, meaning it's a higher conviction short signal. First we'll look at resistances on a rally attempt. The first resistance will be at 7,735-7,736 from its prior downtrend (yellow) with more just above that at 7,740 from its sideways range (green) which would be a retest of Friday's failed breakout. If it can break through both of those, the last resistance to watch will be from its new primary uptrend (white) at about 7,775.
On a pullback, the first support to watch will be from its prior downtrend (yellow) at about 7,682. If that doesn't hold, its primary uptrend (white) would be next at about 7,658. The last support that may come into play for Monday would be at about 7,635-7,636 from its sideways range (green). There would be more daily supports below this as well (purple, orange, blue) but barring a large sell-off they won't be in play for Monday.
The Russell 2000 finally broke below its previous primary uptrend that it had been trading in for nearly a month. This now starts a new daily downtrend for it. The first level to watch on Monday will be at about 2,973 from its prior downtrend (blue) which it closed right around yesterday at 2,972. If it opens above this 2,973 area on Monday then it will act as support. On a bounce back, the first resistance to watch will be from its prior uptrend (green) which it closed below yesterday. That will now be resistance at about 2,995. If it breaks through it, the last daily resistance to watch will be from its new primary downtrend (white) at 3,010-3,011.
If the Russell 2000 fails to open above the first key trend (blue) at that 2,973 level on Monday then it will act as resistance on a rally attempt. From there on a continuation of the pullback, its next support is from this same downtrend (blue - bottom of the range) at about 2,890. If that doesn't hold, it will have more support just below that at about 2,880 from its next downtrend (yellow).
