Friday morning we got the latest batch of inflation data with PPI (Producer Price Index) coming in hot at 0.8%, higher than the 0.6% expected. Headline PPI increased by 0.5%, also above the estimates of 0.3%. This sent the rate sensitive Russell 2000 lower with it closing down 1.68% as it reduces odds of future rate cuts. Odds for the next rate cut have been pushed back to July from June after the recent batch of hot inflation reports. Tech was also weak again as the Nasdaq closed down 0.92% while the S&P fell 0.43%.
The Nasdaq did recover on Friday to finish well off of its lows, but it did break and close below its prior daily uptrend which starts a new downtrend for it. It is already at the bottom of the range for this new downtrend so there is room to bounce as long as there's no gap below this support tomorrow which will be at about 22,475. The Nasdaq closed at 22,668 on Friday, so this support is almost 1% away. Normally I would say that it's very unlikely that it gaps below it, but given the weekend turmoil between the U.S., Israel, and Iran, it is very possible that it does gap below this new downtrend support tomorrow. However, as long as it does hold then it will be support on a pullback. The first resistance level to watch will be from its prior uptrend (purple) which will be at about 22,750. If there is a big rally tomorrow, which I think is pretty unlikely, then the next resistance to watch would be from the new downtrend (white) at about 22,985.
The S&P on Friday put in a failed breakdown on the daily as it broke below its prior uptrend support and closed strong near the highs of day. This starts a new daily uptrend for it, but due to what happened over the weekend there is still risk of a gap below its retest and new uptrend supports.
The first support to watch will be a retest from Friday's failed breakdown (yellow) which will be at about 6,847. After that, its new uptrend (white) will be support at 6,837. It's possible it gaps below both of these tomorrow, and then its prior downtrend (purple) would be the next support to watch which will be right around 6,800. In the event we do see a big rally, the next resistance levels to watch will be at about 6,970 from the primary uptrend (white) and then there would be more just above that at about 6,975 from its prior uptrend (yellow).
The Russell 2000 had a big gap down on Friday after the hot PPI report. This gap down was my concern in the previous update as it closes above it prior uptrend, but I mentioned that it wasn't a strong enough finish to be bullish. Not only did it gap below the prior downtrend, but it also gapped below its uptrend support. This starts a new slight downtrend for it, but it's essentially a sideways range.
The first support to watch from its new primary range (white) will be at about 2,597 with more support just below that from its prior downtrend (purple) at 2,590. If there is a rally back, the first resistance to watch will be from its prior uptrend (yellow) at about 2,667 with its prior downtrend (purple) just above that at 2,670. If it breaks through those, then its new primary trend (white) comes into play at 2,678.
