Futures are struggling to retain their overnight bounce as we approach the open.  Yesterday saw equities drop like a rock on the news of a possible substantial increase in capital gains taxes for investors with large gains.

This should come as no surprise to anyone who ever listened to candidate Biden, but markets are touchy about taxes.

According to USDJPY, which broke down yesterday, there’s still more downside to come.

continued for members…The big picture…

We saw VIX reverse at our next highest target, but the SMA200 looms large up there at 24.22.USDJPY’s breakdown should start to hurt stocks if it doesn’t promptly reverse.  Remember, the last reversal at the purple channel top was very painful for stocks.EURUSD is again threatening to break out… …but, I expect it to run out of juice lest DXY break down. Gold and silver continue to cling to recent gains…

…and BTC has reached the bottom of its pink channel, cloud and SMA100. If it doesn’t bounce here, the next support is the blue 2.618 at 46,433 followed by the blue 2.24 at 40,180 and the SMA200 (currently at 29,334 but which could reach the 2.24 in the next month or so.) The bond market is fairly quiet this morning, with the 10Y still hanging around 1.55%. I’m still looking for a breakdown to the 1.25% area in the next couple of weeks.

The only problem is that this should be enough to get ZN back above the white channel midline – which should be strong resistance. And, it obviously doesn’t make sense given the strong inflation numbers coming in a few weeks. The only way it does make sense is if rates plunge in response to an equity correction.

UPDATE:  11:25 AM

VIX has pulled back to the brink of a breakdown and USDJPY has bounced back above its TL (though potentially a backtest.) Between those and the CL/RB bounces, stocks are up almost 1% on the day. Yet another moment of truth for the algos…

UPDATE: 3:45 PM

There’s not much the bears can do when VIX breaks down and plunges over 10% and USDJPY recovers back above important support. New highs for both ES and SPX…which, along with busting the H&S, was obviously the point.