This morning we got CPI data and it rose 0.60% month-over-month which was in-line with expectations. However, year-over-year CPI came in at 3.70% which was higher than the 3.60% expectation. This sent yields spiking and index futures lower and losses accelerated throughout the day even though yields reversed. The 10 year yield broke above 5.30% in the morning again after the CPI data, but reversed to closed negative on the day. Regardless of the reversal in yields, markets didn't rebound much with small caps getting hit the hardest as the Russell 2000 closed down 1.93%. Semiconductors were under pressure again which was a drag on tech as the Nasdaq closed down 1.88%. The S&P finally closed down over 1%, falling 1.11% on the day, which is the first day in nearly 2 months that it has posted more than a 1% decline. With the sell-off in markets the VIX jumped over 10% and settled at $16.87.
Today the Nasdaq finally broke down below its previous primary uptrend that it had been trading in for the past month. It was a strong breakdown and it closed well below it, but it still starts a new primary uptrend for now. Now there's risk of further breakdown below it tomorrow or potentially a gap below it as it was a really weak finish today.
First we'll look at resistance, and the only daily resistance to watch now will be from its prior primary uptrend (green) that it broke and closed below today. If there's a snap back rally tomorrow it will be resistance at 27,050-27,075.
The first key support to watch will be from its new primary uptrend (white) that it started today. This will be support around 26,650 for tomorrow which is just below today's close of 26,692. As long as it opens above it tomorrow, it'll act as support on a pullback. However it's only about 0.20% away from today's close so there is real risk of a gap below it. If that were to happen, the 26,650 area would then become resistance. If it breaks or potentially gaps below the primary uptrend, its next support will be at 26,475-26,500 from its next downtrend (blue). If this doesn't hold either, the last daily support that would potentially be in play for tomorrow would be its next downtrend (orange) around 26,100 which is another 2.20% away.
The S&P gapped below its previous primary uptrend on the CPI print and it sold off down to the last daily support I noted to watch for in yesterday's update at about 7,690 (orange). It hit a low of 7,693.31 before it recovered a bit into the close as it reclaimed its prior downtrend (green) at the 7,715-7,717 level.
Unlike the Nasdaq, the S&P starts a new primary downtrend now (white). This primary downtrend would be the only resistance potentially in play for tomorrow at about 7,805 if we were to get a snap back rally.
On a continuation of the pullback, the first support to watch will be at 7,715-7,715 from that prior downtrend (green) again which it managed to reclaim today. Since it closed just above it at 7,718.94, there is risk of a gap below it tomorrow. If that were to happen, this level would then become resistance. After that, the 7,707 area will be the next support to watch (blue) which it could also potentially gap below - in which case it would also become resistance. The next support would be at 7,692-7,693 from its prior uptrend (orange) which is right around today's low. If that doesn't hold, its new primary downtrend (white) would be support at 7,687-7,688 and there would be more just below that from its next downtrend (peach) at 7,680-7,682. If none of these supports hold, the 7,645 level would be next from the bottom of its next downtrend (green) and if we get another big sell-off the last support that likely comes into play would be from its big prior sideways range (purple) at 7,595.
The Russell 2000 continues to trade lower in its big primary downtrend which remains as its only daily range as it hasn't broken through it either way yet. It's back near the middle of the range as well so a test of either side is equally likely at this point. Resistance from the top of the range will be at 2,840-2,845 while support from the bottom of the range will be at 2,660-2,665.
