Futures were looking bleak last night as the war with Iran appeared to be escalating. Oil rallied over 30% overnight, adding to last week's gain of 37% which was its biggest weekly gain in history. Index futures were diving with the Russell 2000 (RTY_F) down 4% as future rate cuts were looking less and less likely. But, futures did recover some by this morning's market open. They were still down, but it wasn't as bad. Late in the afternoon, Trump made comments to CBS saying that the war could be over soon and the markets ripped higher on his comments. Oil also reversed sharply and closed the session down 6.4% which was a 29% decline from the overnight highs. Tech led the markets higher with the Nasdaq closing up 1.38%. The 10 year treasury yield also reversed which help boost small caps as the Russell 2000 closed up 1.12%. Meanwhile the S&P posted a gain of 0.83%. The VIX also had a dramatic reversal after hitting a high of $35.30, its highest levels since last year's tariff sell-off. It ended up closing at $25.50, down 13.5% for the day.
Looking at technical levels for tomorrow, the Nasdaq bounced almost perfectly off its primary daily downtrend at 22,065 that I mentioned in the previous daily update. It had a slight break through it, putting in a low at 22,061.97 and closed well above it with the rally back. Since it did break through it, even though it was a very tiny break, it's technically a failed breakdown. However, since it did make a new low, the new trend is also still lower. It's actually nearly identical to the prior downtrend.
So these trends (new primary white trend and the prior yellow trend) will both be resistance at 22,825-22,835 tomorrow. If it clears through these resistances, then its prior uptrend (purple) will be resistance at 23,065-23,070. If we get another sharp sell-off again then the next supports will also be from its two downtrends (white and yellow) at 22,045-22,050 tomorrow. It's also worth noting that the rally today stopped just shy of its primary weekly resistance around 22,760 (see the weekly update).
The S&P opened just above its previous primary downtrend support that I talked about in the last update. This level was at about 6,695 and it opened at 6,699.80, but it quickly broke through it in the morning. It did close well above it with the rally back and put in a failed breakdown on the daily. Since it did make a lower low, it still starts a new downtrend. However, it closes really strong and odds are it opens above this new downtrend tomorrow. The key level from this new downtrend (white) will be at about 6,733-6,734 tomorrow. The S&P finished at 6,795.99 today so there would need to be about a 1% gap down tomorrow to open below it. Given the current volatility it is possible, but for now it's looking a lot more constructive. As long as it does open above it, then it would act as support on a pullback and retest. The next resistance level to watch will be from its prior downtrend (yellow) at about 6,823 and if it breaks through that then its prior uptrend (purple) would be in play at about 6,910.
If we do get that big gap down below the primary downtrend at 6,733-6,734, then the next support to watch will be at about 6,680 from its prior downtrend (yellow) that it rallied back to close above today. If that does not hold, then its next support would be from its new primary downtrend (white) at about 6,560. The S&P did break through its weekly uptrend support today on the gap down, but we will need to see how it finishes this week for the next trend.
The Russell 2000 also opened above its prior downtrend support, broke below it, and rallied back to close above it putting in a failed breakdown. Similar to the S&P it starts a new downtrend with the lower low that it made and it's likely to open above this new downtrend due to how far it is from where it closed today. That new downtrend will be at support/resistance at about 2,503 tomorrow which is about 2% away from where it closed today. So there would need to be a really big gap down tomorrow to open back below it.
Assuming it does not have that big gap down below 2,503, then that level will act as support on a pullback and retest. The next area to watch would be about 2,553 from its prior downtrend (yellow) which again is right where it closed today. If the Russell 2000 opens higher tomorrow then this level becomes support. The next resistance would then be its prior uptrend (purple) at about 2,619.
Now if we do get that big 2% gap down to open below 2,503, or even if it breaks through it during the session, then the next support to watch would be from its prior downtrend (yellow) at 2,472. If that does not hold either, then its primary downtrend (white) comes into play at the bottom of the range which will be at about 2,408.
