After yesterday's big rally in the market, they gave back some of the gains today with tech leading the way lower as the Nasdaq closed down 1.15%. Semiconductors were especially weak which led to the broad tech sell off. SOXX and SMH closed down nearly 6% and 5%, respectively. The Russell 2000 which was leading in the morning also ended up reversing to finish lower by 0.87% while the S&P closed down 0.57%. Despite the pullback, the VIX didn't do much today. It spent most of the day lower but rallied into the close and settled up 1.3% near the highs of the day. However, considering the pullback in markets and the Fed rate decision tomorrow, the action in the VIX was very muted.
As I mentioned in yesterday's update, the markets were very unlikely to get a big enough gap up to remain in their primary daily uptrends this morning. So this pullback today isn't surprising and was mostly technical in my opinion.
With today's pullback, the Nasdaq did close below its prior uptrend support, but still starts a new uptrend here. The first level to watch however will be from its prior downtrend (yellow) at about 26,380-26,385. The Nasdaq closed just below that at 26,376 today, so it does need a slightly higher open tomorrow for that prior downtrend to act as support again. From there, the first resistance level to watch will be from its new primary uptrend (white) right around 26,900. If it can break through it on a continuation of the rally, then the last resistance likely in play for tomorrow will be from its prior downtrend again (yellow) at about 26,960.
If the Nasdaq fails to open above the first trend (yellow) at 26,380-26,385 tomorrow morning then this level will act as resistance on a rally attempt. If it opens above it, but breaks through it, then the only other support that would potentially be in play for tomorrow would be at about 25,550 from its new primary uptrend (white). That support would be just over 3% away so it's pretty far and may not even be tested. But, I wouldn't rule it out with the Fed tomorrow as it will be a big catalyst.
The S&P also failed to get the gap up above yesterday's primary uptrend support, leading to today's pullback. It also closed below it, but similar to the Nasdaq it still starts a new daily uptrend. The first level for tomorrow to watch will be from its prior uptrend (blue) at 7,541-7,542. The S&P closed at 7,511 today so this prior uptrend will likely end up being resistance unless it can gap back above that 7,541-7,542 level. If it can get the gap above it then it will act as support on a pullback and the next resistance level to watch would then be from its new primary uptrend (white) at about 7,625. If it can break through this level, then the last resistance in play would be from its next uptrend (orange) at 7,680-7,685.
If the S&P fails to get the gap back over its prior uptrend (blue) at 7,541-7,542 then that level will remain as resistance on a rally attempt. The next support to watch on a pullback would then be from its primary uptrend (white) at 7,350-7,355 which is about 2% away from today's close. If that doesn't hold, then the last supports to watch for tomorrow would be from its prior downtrend (yellow) at 7,305-7,310 and finally its prior uptrend (blue) at 7,295-7,300.
The Russell 2000 broke and closed just below yesterday's primary uptrend as well, but also still starts a new daily uptrend. The first trend to watch tomorrow will its prior uptrend (blue) which it closed below today. This will be at about 2,973 tomorrow which is well above today's close of 2,939. So in all likelihood it will be resistance on a rally attempt. However, if it can gap back over it, or simply break through it, then the last resistance likely in play tomorrow would be from its new primary uptrend (white) at about 3,035 which is just over 3% away.
If the Russell fails to gap back over its prior uptrend (blue) at 2,973 then that level will remain as resistance on a rally attempt. And on a continued pullback, the next support to watch would be from its primary uptrend (white) at about 2,909. If that doesn't hold, the last support to watch for tomorrow would be from its prior downtrend (yellow) at about 2,850.
