Overnight there was a lot of selling across the globe, most notably in South Korea's KOSPI index which is dominated by Samsung and SK Hynix along with other semiconductor stocks. The KOSPI index was halted today after its circuit breaker triggered from its steep decline. By the end of the day the index had closed down 9.99%, one of its largest one day losses on record. This spilled over into the U.S. session as fears grew about the run in semiconductor stocks which took a beating today. The SOXX ETF closed down nearly 8% while SMH lost 7%. Due to the tech sell-off the Nasdaq was the worst performing index, closing down 2.21%. The S&P lost 1.44% while the Russell 2000 closed down 0.96%. With the sell-off today the VIX did jump nearly 13% to close at $19.49. While it was off of the day's high of $20.54, the VIX curve is once again in backwardation.
Looking at the technical setups for tomorrow now, the Nasdaq gapped below its previous primary uptrend support this morning so that level around 25,875 became resistance today rather than support. It also got rejected right around this level on the retest and closed well below it. Now it does still start a new primary daily uptrend (white) for tomorrow. But, it needs to gap back up a bit to open above it in the morning. That new primary uptrend will be around 25,620 tomorrow which is only about 0.15% away from today's close of 25,887. So it doesn't need much of a gap up to open back over it. If it does get this gap up, then the 25,620 area will act as support on a retest. From there, the only resistance potentially in play for tomorrow would be from its prior uptrend (yellow) at 25,950-25,975.
If the Nasdaq fails to get the gap back above its primary uptrend (white) at that 25,620 level then it will be resistance on a rally attempt. It could open above it but still break down through it as well, and on a continuation of the pullback the next support to watch would be from its prior sideways range (purple) at 25,240-25,250. If that doesn't hold, the same range will be support again (from the bottom of the range) at 24,850-24,860.
The S&P also gapped below its previous primary uptrend support this morning. This support which I mentioned in yesterday's update was at 7,424-7,425 which is exactly where it got rejected at on the early rally attempt in the morning as that level became resistance after the S&P opened below it. Unlike the Nasdaq however, the S&P now starts a new primary downtrend.
The first level to watch tomorrow for the S&P on a bounce back will be at its prior uptrend (orange) which it closed below today. That will be resistance at 7,445-7,450 on a rally attempt. If it breaks through, then its new primary downtrend (white) would be the last daily resistance to watch at about 7,505.
On a continued pullback, its prior uptrend (blue) will be the first support to watch at 7,335-7,340. If it were to gap below this level tomorrow then this level would become resistance on a rally attempt. The next support to watch will be from its prior downtrend (yellow) at about 7,190. After that, its primary uptrend (white - bottom of the range) comes into play again at 7,160-7,165 and the last support to watch would be from its prior sideways range (purple) at about 7,150. However, there will also be weekly support around 7,265 from its primary uptrend (see the weekly update).
The Russell 2000 looks a bit different here as it put in a failed breakdown today. It opened right at its primary uptrend this morning around 2,965 and broke below it, but rallied back to close back over it. This starts a new primary uptrend for it, but ideally it still needs to gap up tomorrow.
Its new primary uptrend (white) will be the first level to watch at 2,969-2,970. It closed today at 2,975 so it's already above this level. However, the retest of today's failed breakdown (yellow) will be higher at about 2,984 which is above today's close. So the Russell ideally needs to gap above this 2,984 area to open above its retest support.
These will be the only two levels in play for tomorrow. If it can open above both of them, they will both act as support on a pullback and vice versa if it opens below them (or one of them). If it does break or gap below its primary uptrend at 2,969-2,970 then it will start a new trend but we'll have to wait and see how it finishes to determine the direction of that new trend heading into Thursday.
