Yesterday was an exercise in propping up equities until the close, which clearly pointed to a continuation of the slide.  Thanks to oil’s pump and VIX’s dump overnight, however, the futures were able to break out of their funk and are now sporting a 6-pt gain going into the open.

This leaves the downside from SPX’s recent backtest in limbo — which, of course, is the whole point.

continued for members…

Look for SPX to backtest the white channel midline on the open.  If it’s able to push through it, look for a pop up to 2462ish.  This would jibe with ES’s push to backtest red channel line and .618 at 2460.71.

This would rely, of course, on VIX dropping through the yellow channel bottom… …and, CL remaining in breakout mode – which I don’t believe it can.If SPX can’t push through, then our 2438.23 target is still in play — but, as a backtest to the falling white channel it broke out of yesterday afternoon.

It seems that falling channels are no longer allowed to deliver SPX directly to a logical Fib or channel target. Rising channels, sure.  Just not falling channels.

The tag must always be delivered via a backtest, meaning we must always bet against a breakout in order to make money on the downside.  Crazy way to run an asylum…

UPDATE:  10:37 AM

Pretty close on the backtest, but cut short by VIX reversing at its SMA5 200.   As a result, the falling white channel was backtested but the rising white channel was not.  Ideally, we’d get another leg down to 2438ish. UPDATE:  11:29 AM

The .618 and channel bottom in one.  If 2438 doesn’t hold, the next support is 2436.06, 2431.65 and 2415.41.UPDATE:  11:38 AM

ES has now reached its channel bottom, so both it and SPX should bounce here.  The only problem is CL, which has further to go (channel bottom at 46.96 and target down at 45.25.)  Even VIX is likely to leak up to its SMA10 at 12.99.  Should be okay to go long here, but with tight stops. My expectation is that CL will bounce around 46.96-47, enabling SPX to get a nice bounce, too, and it will then decline further in the after-hours.  I would expect VIX to reverse sharply at its SMA10 – now 13.06.

Stay tuned.

UPDATE:  2:09 PM

It’s a little troubling for bulls that SPX just slipped below its SMA5 20 and white midline.  Note that VIX bounced off its SMA5 200 and has a clear path up to the SMA10.  I’d consider shorting here, but would definitely short on any sustained move below 2438. UPDATE:  3:44 PM

SPX has been propped up by CL, but VIX is advancing steadily.  It seems like SPX is likely to break down.  I’d continue to hold short. VIX is not helping much.