Last night when futures opened there was a big gap down with Nasdaq and Russell 2000 futures down over 1% and S&P futures down nearly 1%. But, futures reversed overnight and the markets actually ended up opening a little higher this morning and continued to rally throughout the day. However, the rotation out of small caps continued as the Russell 2000 closed down 0.36% while the Nasdaq closed up 0.42% and the S&P led with a gain of 0.50%. There was some selling into the close and there was a significant pullback mainly for the Nasdaq, and the VIX managed to close green with a gain of 0.37% despite the overall rally in markets.
With the late day sell off in markets today, the Nasdaq did have a failed breakout on the daily. In Friday's update I mentioned that the 25,750 level was the key daily resistance to watch which it actually got rejected at this morning on its initial breakout attempt. It did break through it later in the day on its second test, but it failed to close above it which now gives it that failed breakout. Since it did put in a higher high, it still starts a new uptrend going into tomorrow. But its already at the top of this new range and the uptrend that it failed to close above will also act as resistance on a retest tomorrow. So there is risk of a pullback again here.
The first resistance to watch tomorrow will be on a retest of today's failed breakout (blue) which will be just below 25,800 which is also right around today's high of 25,795.10. If it breaks through the retest, then the next resistance level to watch will be from the new uptrend (white) that it started today which will be around 25,885. On a pullback tomorrow, the first support would be around 25,460 from the prior daily downtrend (yellow). After that, there would be more support at about 25,390 (purple) and then the new uptrend support (white) would be at about 25,345 - however it may take a couple of days to get back to the bottom of this new range in which case that support would be higher later in the week.
The S&P broke and closed above its prior uptrend resistance around 6,935 that I mentioned in Friday's update. Now this trend is no longer valid and for now it trades in a single sideways trend. That resistance remains at about 6,980-6,985, but it also has weekly resistance (see this weekend's update) at about 6,970-6,975 which it did not break through this morning. So this area between 6,970-6,985 where both the daily and weekly resistances sit will be a big area to watch this week.
Lastly, for the Russell 2000, it did not break through its new daily downtrend either way. So everything remains the same from Friday's update. But the levels to watch in its primary downtrend are lower now. The resistance from its primary downtrend will be at about 2,667 for tomorrow which it could potentially gap above as it didn't close too far from it today at 2,659. If it does gap above the 2,667 level tomorrow then that area becomes support and we'll have to see how it closes for the new trend. But, as long as there's no gap above 2,667 then that area will be resistance in the downtrend. Meanwhile support from the downtrend will be at about 2,620. It's also worth noting that there is now bearish daily divergence for the Russell.
