The markets are closed tomorrow for Martin Luther King Jr. Day, but futures are open tonight and they are all they are all down around 1% for ES (S&P), RTY (Russell 2000) and NQ (Nasdaq) after President Trump threatened tariffs on European NATO countries that were backing Denmark against the United States' push to acquire Greenland. Trump on Truth Social said that he will impose a 10% tariff starting February 1st and it will increase to 25% by June 1st unless a deal is reached for Greenland. He said that the tariffs would apply to the following 8 nations: Denmark, Norway, Sweden, France, Germany, the U.K., the Netherlands and Finland. The EU responded over the weekend saying they are weighing retaliatory measures including tariffs and more serious economic sanctions against the U.S. if Trump were to follow through with this tariff threat.
Even though futures are currently weak, it's not unusual during the holidays when futures are open but the rest of markets remain closed. Volume is light and they often reverse course when things get back to normal. So it might be best to take the current weakness with a grain of salt. But there is risk of a pullback in markets this week as it wasn't a particularly strong finish last week for markets - especially for tech.
Starting with the Nasdaq, it did break through its weekly uptrend support last week. Now it did manage to rally back to close above it to put in a failed breakdown, but it wasn't a strong finish and it likely will open below its prior uptrend support (yellow) on Tuesday which means that it would be resistance on a retest. That level would be at about 25,640. Given that it closed at 25,529 and how futures currently look, it is likely that we will open below this level and it will be resistance. On the off chance that it gaps above it on Tuesday, then that 25,640 level would become support. With the failed breakdown last week it does still start a new uptrend, and that new uptrend (white) would provide support at about 24,425.
The S&P remains in a single weekly uptrend which it bounced off of last week. It wasn't a very strong finish for it either, and there is risk of gapping below it on Tuesday if futures hold their losses. That weekly support for this week will be at about 6,925. It closed at 6,940 so it wouldn't require a big gap down to get there. Even if it does open above it, there's still risk of a breakdown below it with a minor pullback. If it does end up breaking down through this uptrend support then the new trend that it starts will still be an uptrend as it has been making higher highs. However, if it closes below that 6,925 level (especially if it's a weak finish) then there's risk of a larger pullback towards 6,700. But for now we'll have to wait and see whether or not it breaks below it - and if it breaks below it we'll have to see whether or not it closes below it.
Lastly, the Russell 2000 had a strong finish last week. It gained 2% for the week and held nearly all of its gains too. It also broke through its last weekly downtrend and now it starts a new weekly uptrend. So for now, small caps continue to look the best. There is still room to pullback in this new uptrend, but they still look look the healthiest. For now, the resistance level to watch will be at about 2,725-2,730 from its new weekly uptrend (white). Meanwhile, on a pullback there will be support at about 2,628 on a retest of its prior weekly downtrend (yellow) with more support at about 2,590 from the new uptrend if we were to get a larger sell off this week.
