A Tipping Point

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SPX came within 7 points of our downside target on Thursday, bounced 40 points to close just above its SMA200 on Friday, saw futures fluctuate as much as 50 points on Sunday, and recover from a 20-pt decline earlier today. If you like head fakes, you’ll love this morning’s recovery.

Looking for clues? With not-so-veiled threats of $400/barrel oil from our “friends,” the Saudis, CL is up a “whopping” .42% and RBOB is off slightly.

continued for members…

I think the bigger tell will end up being currencies. USDJPY tagged our next downside target early this morning. If it holds, SPX should recover. If the latest channel breaks down (remember, it’s a backtest) then we should get another leg down to SPX 2703.62.

A small breakdown to the SMA200 at 111.29 might be enough if CL and RB cooperate. But, I can’t shake the feeling that EURUSD is about to spike up to its SMA200, meaning USDJPY could drop through to its SMA200 at 109.76 and DXY could come unraveled.

GC tagged our initial upside target. If my premise about DXY tumbling is correct, we should see more upside.

VIX has had plenty of opportunities to plunge and save SPX from another downturn. But, it has held up just fine, with 30.32 still in reach. If ES were above its SMA200, we could assume the fix is in and SPX will continue higher. But, with it sitting just below the SMA200, VIX not declining, the USD due for a downturn, and CL and RB with further downside, I’m looking for another leg down to 2703.62 and potentially 2688.63.