In the first half of the month small caps were actually leading the markets with IWM up nearly 4% and they had finally reached new all time highs after years of underperformance. It felt like the great rotation was finally upon us. However, over the last 2 weeks IWM has given back all of those gains, falling nearly 4% from its all time highs set on December 12th. It continued lower again today, closing down 0.74%. QQQ and SPY also finished lower by 0.23% and 0.12%, respectively.
In the last few updates I've noted that small caps were breaking down, including yesterday's update when it finally started a new daily downtrend. That downtrend support at $248.25 was also broken into the close today, and it closed below it. This starts another downtrend for it on the daily and it's looking more and more likely that it will start a weekly downtrend heading into the new year unless it can rally back sharply into the end of the week. But, with markets closed on Thursday for the New Year's holiday, it's running out of time.
There is actually a bit of a silver lining with today's close as the prior downtrend will now act as support around $247.50 as long as IWM does not gap below that level tomorrow. If IWM does break or gap below that support, then the next daily support level to watch will be at about $246.60 from the new downtrend that started today. Resistance from this new downtrend will be at $249. If it does break or even potentially gaps above $249, then the next resistance would be at about $250.35 from the prior downtrend.
QQQ also finished weak near its lows today and closed below its prior daily uptrend supports. Yesterday it did put in a failed breakdown, but I mentioned that it did not finish strong enough to be bullish. It also failed to gap back over those supports. Now as I said yesterday, even if it closes below these supports that the new trend would still be higher - which it is. However, because of the weak finish again it needs to see a gap up tomorrow above $620.60 which is about where that support will be at for tomorrow. If it doesn't gap above it, then the $620.60 area becomes resistance. It is still possible for it to close above that level even if it opens below it, but if it does not close above that $620.60 area tomorrow then it will start a new daily downtrend.
Lastly for SPY, nothing changes again. It remains in the same daily uptrend that it has been in since mid-December. It continues to perform the best and for now there's nothing to be concerned about with it until it gets back down to that support.
