Friday’s sell-off came a day earlier than originally expected and pushed past our initial target by a few points.  But, of course, it was long overdue in a general sense — adding to the general sense of panic that would otherwise never be associated with a 2.4% dip.

We saw futures continue lower yesterday, testing 2100 before a sharp upturn this morning.

To be clear, there is a real risk of the Fed dropping the ball here.  They’ve done it before, and they’ll do it again.  If all depends on what happens when SPX tests our secondary target: the SMA100 at 2120.

continued for members…

The SMA100 and purple 1.618 are right next to each other at 2120ish this morning.  This was the secondary target we discussed Friday.

There could be plenty of games played with traders in this range.  For instance, the SMA100 is down at 2120.  But, it is essential for bulls to hold this price level.

ES’ recovery has stalled in negative territory, meaning it’s not done.USDJPY has support if it wishes to avail itself.

And, DX has backtested its support zone.

VIX has almost reached the .618 of the drop from 26.72.
And, CL is closing in on the white channel bottom at 43ish.  They keep trying to get it down there to establish strong support for a bounce, but it’s been too difficult given stocks’ fragile state.

UPDATE:  9:30 AM

SPX just tagged the SMA100 and 1.618.  For those not already holding long, this is very important support and should hold.

Watch to see if ES rejoins its broken falling white channel.

And, VIX should start to work on closing its gap.

UPDATE:  10:40 AM

SPX has topped the 2015 highs again, and seems to be holding on reasonably well.  It should at least pause here, though.

CL has reversed the breakdown of the rising white channel, and should at least backtest the SMA100.Bulls will need VIX to break down below its SMA200… …and, NKD to break back above the white TL.

For those who trade RUT, we plotted a full backtest of the broken purple channel as a possible downside after reaching the purple .886, which RUT did last week.  But, there’s also good TL support at his morning’s lows.  It provided sharp bounces last September and December, and again in August.  It’s also the midline of the rising gray channel that broke down in January but was revived in Feb.

UPDATE:  12:57 PM

Kashkari speaks in a few minutes, and Brainard a little later at 1:15.  SPX has reached another one of those levels that could mark a backtest – perhaps of the SMA5 100 at 2140ish.  Note that VIX is at potential support.  

Bottom line, pay attention and consider tightening up your stops here.  If it pops through, the next resistance is 2147.58, followed by the red channel bottom at 2152ish.  I think it’s more likely it drops a bit first.

Brainard’s speech can be seen at THIS LINK.

UPDATE:  1:16 PM

Brainard still sounds plenty dovish.  SPX is popping up a little higher.  We’ll want to watch it closely as it approaches 2152.  At some point, a backtest of 2135 would make perfect sense.

UPDATE:  1:20 PM

This reduces the odds of a September rate hike, which is dinging the DX and USDJPY.  I’d take profits here and see if we get a backtest of 2135-2140.  I’m still looking for higher after whatever this pullback delivers.

UPDATE:  1:47 PM

SPX is rebounding, though another leg down to backtest 2135 (ES 2127) still looks possible.  Watch VIX.  If it drops through 16, we’re going higher still.

Helpful charts to watch: VIX, which is at risk of being smacked below 16, and USDJPY, which I still expect to move to our lower targets.

DX is back below the support zone, and is very likely to drop to at least the red TL around 94.51.

UPDATE:  2:00 PM

VIX just got clobbered, so SPX is pushing on up.  Next resistance is the SMA5 200 at 2157ish, followed by the SMA50 at 2163.83.

UPDATE:  2:49 PM

ES just reached important resistance — the Sep 1 lows — so SPX faces potential resistance here at its .618.  A reversal to the white channel midline is a good possibility.  If I’m wrong, then the SMA50 is just above at 2163.83.  Note that I’ve also moved the yellow target up a day to tomorrow.  It intersects with the white channel top and the red .886 at 2180.03 late in the day.

UPDATE:  3:36 PM

VIX is being tapped down (targeting SMA100 at 14.40?), but so are CL and USDJPY.  I’d stay in cash heading into the close unless SPX can push through the .618 at 2161.61.  Swing traders should be safe long overnight, but we’ll likely get a backtest in the morning.

 

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