As we slowly make our way toward the end of Q2, we continue to see tests of important support. They are usually followed by sharp bounces despite the growing evidence that a selloff is right around the corner.Will today be the day the market finally takes the plunge?

continued for members…

This one came within 4 points of our old friend, ES’ 2.618 Fib extension at 3076.93 and might still get there later today.  It was aided and abetted by a bounce in VIX…

…continuing weakness in USDJPY (which suddenly reversed as ES 3076 approached)…

…and what I expect to be a nice pullback in CL…now that it has closed the gap from March.

RB is very close to its SMA200 target (1.3435) and has a gap to close at 1.384.

ES’ bigger picture shows a sloppy falling white channel which will probably need plenty of adjustment before all is said and done. If 3076 breaks down, the next significant support is the intersection of the purple .618, SMA200 and falling white channel at 3013-3017. SPX broke out of the falling white channel last proposed, but should reenter it on the open.  The ES target mentioned above correlates nicely with SPX’s purple .618 at 3038.19. Note, however, that it would mean a dip below SPX’s 2.618 at 2047.34, but wouldn’t quite reach its SMA200 at 3020. Lacking a single, clearly-defined target, things could get messy.VIX continues to play cat and mouse with its SMA20, still with the threat of a backtest of the yellow TL and/or SMA200 and/or .886 hanging over bears’ head. We continue to see growing evidence of at least a modest downturn. 10/20 crosses now include ES, SPX, VIX, DJIA and NKD.EURUSD should join the list in the next day or two.  This should allow DXY a nice bounce – with the spike much higher if stocks can properly break down.Last, DJIA is still below its SMA200 and likely ready for the junk heap. While COMP left a bearish candle in its wake yesterday and is likely ready for a reversal here at its 2.24 Fib.Institutional portfolios, which generally require at least quarterly rebalancing, are overweight stocks after this quarter’s record-breaking bounce. This means they will sell equities sometime in the next week or two.

SPX is currently down about 8% from its all-time highs and 3.7% from its Jun 8 highs. I believe that most who held long during the Feb-Mar flop might be thanking their lucky stars to have recovered so much of their initial losses in the face of such a sucky economy and global pandemic. It would be logical to take some profits and at least shed the ones that make absolutely no sense – especially consumer cyclicals, transportation, retail and commercial real estate, etc.

Last, the Fed is currently taking a pause, meaning that most of the impetus behind higher equity prices will be absent for a while – at least until things get dicey again.  While they have proven their interest and ability in preventing big losses, I don’t believe they have the chutzpah to actively push stocks to new all-time highs.

For all these reasons and many more, I remain bearish – with the proviso that we could still get a bounce up to the .786 or .886 retracement.

UPDATE:  10:00 AM

There’s the 2.618 test. From the looks of VIX and NKD, it’s likely not done.

Note also that AAPL hasn’t broken out and still looks like a good short here. UPDATE:  10:56 AM

So far, so good. Note that CL is coming up on its backtest target and VIX is testing that little red TL connecting the last three highs.

  UPDATE:  11:56 AM

SPX has tagged its 2.618, 2.618, and channel midline – all except for the SMA200. ES is just shy of its SMA200, .618 and channel midline. Should get a bounce soon, with the potential for lower lows to tag the SMA200s after the bounce.  CL should also bounce here.

UPDATE:  3:48 PM

Coming up on the close, and ES/SPX are still bouncing rather than tagging their SMA200s – though the session’s not quite over. Hard to say whether we’ll get the tags in the morning (or at all) as the PPT is no doubt making plans. Note that VIX is getting pressured back down below its SMA10.

Lately, ES has been making additional downside progress after SPX closes just to screw over the cash basis retail guys.

If the SMA200s don’t hold, we have no shortage of downside targets. The most important are the 2.24s at ES 2728.79 and SPX 2703.62.