Breakouts from well-established falling channels are usually followed by backtests of that channel. This is how bulls put all that nasty bearishness behind them, freeing stocks for another leg up. Except, it doesn’t always turn out that way.  Sure, ES nailed our backtest target. But will it follow through with a respectable bounce?

continued for members...

The backtest was picture perfect, and right in front of a holiday weekend. It’s even accompanied by a 6% plunge in VIX to a point where it is able to break down in a very visible manner. It’s already back below its SMA200.The currencies are certainly cooperating. USDJPY has pushed above the .886 that would normally present some strong overhead resistance.

Remember these charts from yesterday. It’s entirely possible that the little 2-week pullback is all we’ll get. The BoJ is in desperation mode and desperate central bankers do desperate things – even if it means an increasingly horrible eventual outcome.

EURUSD is still perched at its .786 target – first reached six weeks ago – as though everything is just fine in the euro zone. Spoiler alert: it’s not. And, it’s going to get much worse.

Combined, the euro and yen moves are enough to get DXY almost to the .786 where it should react.CL is going much the same thing: a 2%+ bounce that accomplishes nothing from a chart standpoint but gooses the algos as though it was important. These bounces won’t really mean anything real until a breakout past the SMA200.RB is bouncing off nothing, with additional downside if, as I suspect, it intends to backtest the 2018 highs at 2.2855.

Mission accomplished on the 10Y.  As discussed yesterday, the Fed seems perfectly willing to extend the inversion as long as it takes to get inflation back under control. This last chart is a perfect representation of where we are in the markets. Having broken back above the TL from last November, VIX is testing it over again. Will it hold? The odds are very strong we won’t know until Tuesday – meaning traders on either side will have to brave the usual very high risk 3-day weekend.