It’s a light volume day leading up to a holiday weekend – the market’s favorite time to take a shot at important resistance. Though SPX tagged its 3.618 Fibonacci extension several weeks ago, ES has fallen short time after time. The disappointing employment data due out at 8:30 wasn’t going to help, so VIX jumped in with a 7.4% decline at 8:03, falling through the gap close at 18.21 from Feb 21, 2020.  It wasn’t quite enough to get ES up to 3998 (those pesky unemployment data.)But, then, the game’s not over yet…is it?

continued for members…Will ES make its tag? And, will it make it without SPX putting in higher highs? The less egregious way would be to do it on Friday or Sunday when the cash market is closed. But, it seems fairly likely one way or another.

Just keep an eye on VIX, especially around the ISM manufacturing release at 10am. The currency front remains supportive of stocks, with DXY having broken out but not in an alarming way as EURUSD’s stall is mitigating USDJPY’s ascent.

It’s important to note that USDJPY’s breakouts have failed before. In 2020, it broke out of the falling purple channel for only a couple of days. When the breakout failed, stocks crashed hard.In fact, each of the reversals at the top of the falling channel have been unkind to stocks. The one in October 2018 led to a pretty sharp correction as well.We get a sense, therefore, as to how important it is to bulls that USDJPY not reverse here. It would be very hard for stocks to rally if it suddenly heads south.

The tradeoff, as we’ve discussed so many times, is that a sharp rise in USDJPY means the yen is losing value and oil/gas are becoming more expensive at an increasing rate in the hedge fund known as Japan – our ally in all things financial. This drives interest rates higher, a problem given their enormous debt.

So, for now, we’ll stick to our assumption that the plunge in oil/gas prices will be accompanied by a plunge in the yen.

Elsewhere in currency space, SI is backtesting its SMA200… …while GC is backtesting its SMA10/20. And, BTC is in a prime position to backtest that 2.618 Fib and channel bottom target.

I don’t expect RB or CL will break down until ES has finished its business. And TNX seems unlikely to tumble until CL does.UPDATE:  10:35 AM

3997 is probably close enough to short – with reasonable stops, of course. I have no way of knowing whether or not TPTB intend to bust through this overhead resistance. All I know is that the clues should be visible in how VIX, USDJPY and CL react at this point.

GLTA.

UPDATE:  12:35 PM

UPDATE: 3:50 PM

Despite the above, and despite the overwhelming need to crash oil/gas prices, we’re getting a pretty unnerving head fake at the moment.  All I can say is we’ve seen this many times before. It’s entirely consistent with similar past situations and I am inclined to stick to my short guns at this point – though it is admittedly unnerving whilst going into a holiday weekend.

I am much less confident in SPX/ES reversing course at this time, as it appears they will close safely above the 3.618s thanks to what I expect to be additional monkey-hammering on VIX. USDJPY is somewhat less convincing, as it is back below its .886 and broke down below the tiny little triangle of the past few days. Still, it hasn’t broken the dashed red TL from Mar 23, so the algos are still understandably emboldened.

FWIW (which isn’t always that much when it comes to the BoJ) NKD has still broken down and is still backtesting the broken purple TL.  A decline from here to the 127.2 Fib at 26463 would be a 10.9% correction – equivalent to SPX 3580 – about where its SMA200 should be in a few days.

The Saudis and oil majors have no doubt already hedged all they need to in order to survive a 30-45 day slump in gas prices. The stock market is a different story.  While SPX and ES could also be throwing us a head fake, I wouldn’t bet on it.

Equity markets are closed tomorrow, so I’m going to take the day and try to get several pages updated.  I wish everybody a safe and enjoyable holiday weekend.