Thanks to VIX being hammered by 20% from yesterday’s highs, futures have recovered almost .50% – just enough to reach the bottom of the channel from which they broke down. SPX experienced a similar recovery late in the day, preserving (for now) the integrity of the channel that has produced a stunning 23% return since Oct 27.

Stock prices almost always melt up into OPEX days. When they don’t, however, they often perform a nosedive instead. SPX remains long overdue. A lasting breakdown of the channel, such as we almost saw yesterday, would be the first sign.

Another would be the 10Y shooting up past our 200-DMA target, which it came within 0.19% of yesterday. The bulls really need rates to settle back down – which will be very unlikely if oil/gas don’t reverse lower.

continued for members…

I would keep a very close eye on ES’ SMA10 at 4993.83. If it can’t hold, then another leg down is quite likely. This remains my favored case, with the SMA50 a very tantalizing target. Despite the 20% smackdown, VIX’s SMA10 crossed back above its SMA20 – a good sign for equity bears. Note that the spike in RSI reached overhead TL resistance before settling back down. Importantly, note that previous tags have been followed by a second one in short succession, resulting in lower lows for stocks.And, EURUSD is still rolling over – albeit at a snail’s pace. With DXY showing no sign of reversing yet and facing no serious resistance.Then there’s CL, which just pushed through its SMA200 to backtest the red channel bottom again. If it rises any higher than 78.70, rates will continue to be under upward pressure.

This being Wednesday, EIA inventories come out at 10:30 ET. RB is off slightly after slamming into its SMA200 yesterday.The 2s10s remains on the sidelines in terms of predictive power. The slight “breakdown” isn’t enough to rattle the algos – but does increase the odds of an eventual crack in the equity markets.

So far, the algos are doing a pretty good job of holding the SMA10…