It’s only happened 4 times in the past five years. The last time it happened was on Feb 27, 2020. SPX had reached a new all-time high of 3393.52 a week earlier and had sold off 12% so far on news of the new coronavirus reaching US shores. We were in the minority of analysts warning of an imminent selloff.
VIX, which had been loitering in the teens for months, had gapped from 17 to 25 a few days before, sending its 50-DMA above its 200-DMA. In technical analysis, this is known as a golden cross. It’s normally a bullish move. But, since a rising VIX is typically bearish for stocks, this was the equivalent of a death cross.
We all remember what happened next.
Note that only half of the prior instances resulted in a large correction. The other half turned out to be insignificant. VIX was hammered into submission within a day or two, unwinding the 50/200 cross and sending stocks scurrying higher.
Which will it be this time? Was this morning’s dreadful jobs report the keymaster and gatekeeper’s meet cute? The “stag” to the economy’s “flation?”
Unlike Nigerian Air Force Lance Corporal Ogah Bercy, we have at least been warned.
We should know soon enough.
continued for members…VIX with all the annotations:
And, our equity charts:
It appears as though USDJPY will get another bearish 10/20 cross…
And EURUSD is slipping again after backtesting its SMA20. 
This puts DXY back on track to reach our 97.73 target.
Gold and silver are still broken down.
And BTC is headed lower, with our SMA200 target (46,254) only a matter of time once the cloud breaks down.
Oil is bouncing slightly, but still in a bear market. 
And, RB has still fallen off a cliff and is looking for support.
UPDATE: 2:46 PM
ES and SPX are breaking down…
…but VIX is coming up on our .886 target.
And USDJPY has fallen about as far as it can without breaking down.
And, CL, having tested its .886, an internal TL, and its former lows, can’t fall much further without setting off alarms.
Bottom line, we’re at a very precarious place. Even slightly more bearishness from the factors and we’re likely to get to the SMA100s and .618s (ES 4443.55 and SPX 4456.53) quite easily. If the factors all break down/out, then the bottom could fall out of equities.
If, on the other hand, we get bounces from USDJPY and CL and a breakdown from VIX, it’s going to be hard to make much more downside progress. Naturally, the markets will close with these questions hanging over our head.
I believe there’s much more downside to come – with a big downdraft possible on Monday – but, as always, advise caution over the weekend. Remember, CPI comes out next Friday.
GLTA