Futures melted up again overnight, reaching the .886 retracement of the late January swoon.
Stocks have been well supported the past three sessions – not by fundamentals, but by a 37% hammering of VIX, an engineered surge in oil and gas futures, and the obligatory breakout in USDJPY.
In other words, it’s the same algo nonsense that got us here in the first place. With all the talk about market manipulation, funny how no one is talking about the Fed…
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Silver, GME and AMC are all tumbling this morning as equity futures are responding to dramatic moves in VIX, oil and currencies. In short, things are getting back to normal. Or are they?
What if this was merely a backtest on steroids to stave off the bearish 10/20 SMA cross which would otherwise have occurred?
ES reached our backtest target overnight, and now has some important decisions to make.
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The flustercluck continues. As we discussed last week, silver is the new shiny object for the Reddit short-busters.
This morning SI decisively confirmed its channel breakout, topping the August 7 highs and forsaking the opportunity to backtest its 200-DMA. Unfortunately for gold bugs, GC has not tagged along.
As SI closes in on our Nov 30 target, what lies ahead for the metals? Can GC keep up? And, how strong a backtest could we get today in equities?
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I can’t remember a time in the last 40 years when the market was turned on its head like this. Not surprisingly, futures have been all over the map as bulls and bears try to establish beachheads and central bankers try to figure out who the good guys and the bad guys are – and what to do about it. Short-sellers as victims? Who would have thunk it?
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ES tagged our downside target yesterday, taking the opportunity to bag the 50 DMA in addition to the 1.272 Fib extension. 
We should get a bounce here as the algos are all swinging into action. USDJPY has broken out as expected, CL/RB are inching higher, and VIX is getting smacked down.
However, the bounce might now last.
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Futures are off sharply again this morning as VIX spiked to our 27.67 target a day ahead of schedule.
Remember Run, Don’t Walk to the Nearest Exit? That post was headlined by RSP, the equal-weighted S&P 500 ETF. It never did break out, but will instead gap lower on the open with a slew of gaps to fill to the downside.
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After nailing Friday’s downside target, ES made another “miraculous” recovery and is pushing toward new, all-time highs. Move along, nothing to see here…
It will come as no surprise to members that the latest recovery was almost entirely driven by another collapse in VIX. The other factors: more silliness from oil/gas and a healthy dose of short covering.
This morning, as algos were deciding whether to complete another ramp job, VIX dropped down through its remaining moving averages – thus guaranteeing a positive open as the FOMC’s two day meeting gets underway.
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In Friday’s post VIX: Back From the Dead we noted that VIX had recovered from the breakdown below trend dating back to Nov 27. This morning, it’s testing overhead resistance from Jan 4 and, if it’s able to break through, will likely take on resistance from Dec 21 or even Oct 29. 
Bears might want to hold off on the champagne just a bit longer, though. One of VIX’s favorite tricks is to race up to resistance in the pre-market so it has someplace to reverse lower from.
The FOMC will issue its latest pearls of wisdom on Wednesday. And, as ES’s chart aptly illustrates, they are loathe to allow a significant decline in the lead-up to these exercises in obfuscation.
Here’s the chart we posted Friday evening.
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The biggest charting development overnight was VIX’s resurrection. Breaking down below its channel bottom dating back to Nov 27 drove stocks to new highs. Will rising back above it bring stocks back down to earth?
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BTC has reached our next downside target – the 1.618 Fibonacci extension at 29,280. As we discussed in our last update [see: Jan 12 BTC Update]:
As we noted [in our Jan 7 update] after it reached the 40,138-40,180 target range, if it can’t hold 40,180, then we could look for a backtest of the 1.618 around 30,000… It would first have to drop back through the pink channel top, currently at 31,333.
It remains to be seen whether yesterday’s 30,261 lows were close enough to the blue 1.618 extension at 29,890 to count. I think there’s a better than average chance it’s not done yet.
It wasn’t. BTC bounced sharply for 3 days before coming back to tag the 1.618 extension. It has since rebounded to the pink channel top. Now the fun part starts.
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