Yesterday morning futures sold off after key economic data as GDP came in at 1.4%, well below the consensus estimate of 2.5%, signaling a slowing U.S. economy. PCE, the Fed's preferred inflation gauge, also came in hotter than expected sparking inflation fears again. The odds of a rate cut also shifted slightly with the next cut now expected in July rather than June. It is still very close for June with odds currently at 45.6% for a 25bps cut while no change sits at 46.5%, but it is down from the 50% chance from Thursday's odds. Markets did open lower yesterday, but quickly rallied back and spiked higher after the Supreme Court struck down the Trump IEEPA (International Emergency Economic Powers Act) tariffs. The rally was led by tech as the Nasdaq closed higher by 0.9% while the S&P closed up 0.69%. The Russell 2000 on the other hand closed down 0.05% as small caps lagged significantly.
After the Supreme Court tariff ruling, President Trump held a press conference to talk about the ruling and essentially said that nothing has changed as the tariffs imposed under IEEPA may have been banned but there are other methods of imposing them through different laws. He also said that he would be imposing a 10% global tariff immediately which markets didn't seem to be rattled by. This morning however he doubled down and said he would be increasing the global tariff to 15%, so we will need to see how markets react to this on Monday and whether or not he continues to escalate the situation.
Looking at the technical setup for Monday, the Nasdaq broke and closed above its daily downtrends and officially starts a new daily uptrend. I mentioned in the last update that I had taken a long position in QQQ and that market risk, especially in the Nasdaq, was now to the upside rather than the downside. This played out well on Friday with tech leading. With the new uptrend on the daily and the recent bullish divergence, it does look like bulls have gained some footing back. But, it doesn't mean that we're out of the woods just yet as larger time frames (see my weekly update) still have work to do.
Let's look at the levels for Monday now. Resistance to watch for the Nasdaq will be from its new daily uptrend (white) which will be at about 23,180. The first support to watch if we sell off again will also be from this primary uptrend at about 22,635. If that does not hold, then its prior downtrends will provide support at 22,510 (blue), 22,450 (yellow) and in the event of a big sell-off the next support would be at 22,200 (purple).
The S&P also broke through its downtrends, but unlike the Nasdaq, it still starts a new daily downtrend going into Monday. But it was a very strong finish near the highs of day, and normally I would say odds are that we open above this new downtrend, but due to the tariff headlines this morning it may throw a wrench into things so we'll just have to wait and see how it opens. But the key support/resistance level to watch from its new primary downtrend (white) will be at about 6,895-6,896. It closed at 6,909 on Friday, so if it does open above the 6,896 level then it will act as support on a retest. If it gaps below it, then it will be resistance on a retest. If it closes above 6,896 on Monday then it will start a new uptrend, and we'll have to wait and see how high it gets for that new trend. Meanwhile, supports on a pullback from its prior downtrends will be at 6,820 (yellow) and then 6,770 (purple) if we were to get a larger sell-off.
The Russell 2000 didn't break through its primary uptrend yesterday so it doesn't start any new trends going into Monday and all of its prior trends also remain valid for now. The first resistance to watch will now be at 2,673 from its sideways range (orange). After that, its primary uptrend (white) would be next at 2,715 if there is a big rally on Monday followed by its prior uptrend (purple) at 2,717. The first support to watch will be at 2,656 (yellow) on a pullback followed by its primary uptrend (white) at 2,648. If that does not hold then the next support will be from its prior uptrend (blue) at 2,639 and finally if there is a big sell-off then its sideways range (orange) will come back into play with support at 2,615.
