The markets were lower again today with tech lagging as the Nasdaq closed down 0.60%. The S&P also fell 0.32% while small caps outperformed on the day with the Russell 2000 closing up 0.32%. Despite the small pullback in markets today, the VIX also closed lower by about 1% at $15.28. Tomorrow morning we will be getting the July CPI print. Headline month-over-month CPI is expected to increase by +0.1% while core month-over-month is expected to come in at +0.2%. Last month's CPI was surprisingly cool after oil prices came down sharply in June. However, in July, oil jumped nearly 25% so we'll see how that carries over into tomorrow's CPI.
This morning the Nasdaq failed to get the gap up it needed to open above its prior uptrend (purple) which was the likely scenario as it required a big gap up to open above it. So today's pullback was expected and it got down right around its primary uptrend from yesterday at the 26,375-26,400 support that I mentioned in yesterday's update. It did break just a hair below it today, but closed back over, which gives it a failed breakdown to start another uptrend for tomorrow.
The first key resistance level to watch on the Nasdaq tomorrow will again be its prior uptrend (purple) which it failed to gap above today. That level will be around 26,535 for tomorrow which is about 0.3% away from today's close of 26,445. If it can gap back above it tomorrow on the CPI data then that level will become support again. From there on a rally attempt the top of this same range (purple) will be the first resistance level to watch at 26,975-27,000. If it breaks through it, the last resistances will be from its primary uptrend (white) and its next uptrend (blue) at 27,025-27,050.
On another pullback, the first support to watch will be from today's failed breakout (blue) around 26,450 with its new primary uptrend (white) just below it around 26,425. If it breaks down through its primary uptrend or potentially even gaps below it, then it will start a new trend heading into Thursday but we'll first have to wait and see how it closes to determine the direction of that new trend.
The S&P got close to its primary daily uptrend support today around 7,700 but it didn't break through it, so it doesn't start any new daily ranges again. It did however break through its first two weekly supports at 7,745-7,750 and 7,730 (see the weekly update) during today's pullback, although its primary weekly uptrend at 7,695-7,700 remains intact.
For tomorrow, its primary daily uptrend support will again be the first support level to watch and that will be around 7,745 which is higher than today's close of 7,728. So we will need to see a gap above this 7,745 level tomorrow for it to act as support, otherwise it will be resistance. Assuming it does get that gap up, the only daily resistance is also from this uptrend which will be at 8,015-8,020 tomorrow. As I said in yesterday's update, the longer it continues to chop around in this range, the less likely it will be to get that rally towards the upper end of it.
Instead, the more likely scenario for tomorrow is a gap/break below its primary uptrend of 7,745 which will start a new primary trend for it. We'll need to wait to see how it finishes to determine the direction of this new trend. There will be more support below it as well around 7,650 from its prior sideways range (yellow) and then the last potential daily support in play would be at about 7,585 from its next sideways range (purple).
The Russell 2000 also remained within its primary daily uptrend again so it doesn't start any new ranges for tomorrow. Its first resistance on a rally tomorrow will continue to be from its prior uptrend (yellow) at 3,048-3,050. If it breaks through, the next resistance to watch will be at its next uptrend (purple) around 3,070. The last resistance to watch will be from its primary uptrend (white) around 3,077-3,078 in the event of a rally on the CPI data.
On a pullback, the only two daily supports likely to come into play will be its prior downtrend (orange) at 2,980-2,982 and then its primary uptrend (white - bottom of the range) at about 2,975.
