We’ve been waiting for what seems forever for the 2.618 Fib backtest [see: Melting Up.] It took 8 sessions to break above it, and 14 sessions since it was last tagged. Now, two sessions later than expected, it’s finally here.

What next? The usual V-shaped rebound to meltup, or does something more sinister lie ahead?

continued for members…As discussed yesterday, it depends on whether ES or SPX is in charge.  ES’ 2.618 is at 3076.93 while SPX’s is at 3047.34. If stocks bounce strongly around 3076.93, then ES’ rising red channel can remain intact.  It would need to rebound to 3188ish.If 3076.93 breaks down, then we’re probably headed for 3047.34, though SPX’s rising white channel bottom and the purple channel backtest (3065ish) potentially stand in the way. A prolonged drop through this double support would negate SPX’s breakout from Nov 1, so this is a critical level for bulls.

If, by some miracle, SPX 3047 didn’t hold, we have plenty of downside targets starting with the SMA50 at 3031, the SMA100 at 2991.94 and the SMA200 at 2928.85. USDJPY has dropped back below its SMA200, with the SMA50 and SMA100 the next levels of support.But, VIX is the more interesting chart IMO.  It is backtesting an important internal TL, with the falling red TL up above at 18.36, which could potentially align with ES 3076.93.Oil and gas are pretty much on the sidelines at present, trying to hold on to yesterday’s close for one more day until Aramco closes. ZN is getting a nice bounce off its recent backtest, but isn’t out of the woods just yet. The 2s10s still signals trouble ahead — especially if it blows out past .27 or drops below 0.14.Traders would do well to prepare for both scenarios. A bounce at ES 3076.93 is quite likely.  But, if it breaks down, don’t hesitate to play along.  If VIX breaks above the falling red TL at 18.40ish, then things could get ugly very quickly.

UPDATE:  9:33 AM

Within 0.33 of its 2.618…UPDATE:  9:48 AM

Here we go…Remember, a sustained drop through SPX 3065 ends the purple channel/IH&S breakout.  So, bulls have a lot at stake.VIX could ease a little higher before it unleashes a panic.Stay tuned…

UPDATE:  1:20 PM

Getting a decent bounce, but the jury’s kinda still out based on VIX’s and SPX’s small shortfalls.

FWIW, VIX has that intersection between the two TLs around Dec 17, meaning we could get an extended bounce and second try at it in two weeks.

I have to run a quick errand, should be back around 3pm.

UPDATE:  6:00 PM

Pretty much as expected, though SPX could have dipped slightly lower. As it was, it practically backtested the purple channel top – which is also the upward sloping neckline for a huge IH&S targeting 3676.I point out the slope of the neckline because upward sloping necklines are affiliated with weaker breakouts than downward sloping ones. They tend to fail more often and produce lower targets.

From a channel standpoint, the small rising red channel is dead. This is notable, as its equivalent in ES is still intact (see below.)The larger rising white channel (which came back to life – after breaking down in October – thanks to the Phase One “deal”) was tested but held. The large purple channel is still broken out of.  And, the huge yellow channel is still intact.And, of course, the 2.618 hasn’t been seriously threatened – at least yet.

From ES’ standpoint, the red channel is still intact as ES closed back inside it.ES’ big channel picture is much messier and not equivalent to SPX. But, of the choices we have… …we can see that aside from the intact small red channel the small white channel is still intact, the large yellow channel midline is intact, and the large white channel .786 line is intact.  The 2.618 held.

All in all, I’d consider this shaken, not stirred — though the same risks still lurk out there as yesterday: CL/RB pressure, potentially higher VIX (it didn’t tag the falling TL or close back below its SMA200)……and a USDJPY which has broken down all over again, closing below its SMA200 this time. Interestingly, though, NKD’s rising white channel is still intact.Note that SPX’s RSI breakout is no more — a failure which hints at more downside.GLTA.